Taro allows layer-1 shitcoins on the Bitcoin blockchain, and layer-2 shitcoins on the Lightning Network. Taro can have "wrapped" Bitcoin which is often only "wrapped" in a trust-me-bro sense. i.e. somebody holds your Bitcoin, and gives you another Taro token on the Bitcoin blockchain, and then you will be transacting with this wrapped Bitcoin on the Bitcoin blockchain until the company that wrapped your Bitcoin goes bankrupt.

Sure it will not happen in a rational world, but I predict there will be entities that entice useful idiots into buying wrapped Bitcoin by saying it will provide an interest rate in some stablecoin.

Cashu, and Fedimint allows fraction reserve banking also just like Taro above. So I do not know which one should we avoid as of now, because both can and will have bad actors.

It will muddy the CFTC/SEC separation of powers even further.

But the market has a proven demand for flexible money supply so all these fake shitcoins will be invented.