[jrumbut]

But the average American, or even pretty financially sophisticated ones, don't have experience with an institution like that.

I think it's fair to expect users to know the coins they buy might lose value, but this is a bizarre and unexpected risk. It's clear from this thread that hardly anyone thought to consider this risk because they are trading off the expectations created by other, better regulated institutions (namely domestic banks).

Edit: I may have misread your intentions, when I wrote this I thought you were saying this arrangement was OK because it has happened elsewhere.