Bearer instruments that are indistinguishable from each other and don't have the ability to be selectively censored and can't be unilaterally prevented by any single entity is what actually makes it self custodial money.

Your company has full control over the ledger of the users that you actively censor and discriminate against. If your password was as good as cash, maybe. But it's not and you have full control of whether or not your KYC'd users can access the funds.