What would it take for a central exchange to be trustworthy?

A lot of news has been floating around the FTX collapse, and more recently about Binance and the CTFC, and the general advice on this sub is to get your coins out of exchanges and into cold wallets, which I do completely agree with.

To those who are more experienced it seems obvious that the safest option is to spend the relatively small amount and buy a cold wallet. But realistically if we want to reach so called ‘mass adoption’, the truth is that a large amount of holding needs to take place on central exchanges. There are considerably more people looking to invest a few hundred into crypto than thousands, and to them spending the time and money to buy a cold wallet may just not be worth it. And if we’re talking about accessibility, setting up and transferring to even a hot wallet is not something the casual investor will be knowledgeable about, as simple as it seems.

Look at stocks for example, brokers such as robin hood and fidelity are responsible for a huge percentage of stocks and shares investments in the US. These brokerages are built on reputation and security, with users trusting them with huge amounts of money. If you ask most people, they think that trading212 (UK) or robin hood are trustworthy places to hold stocks, because that genuinely is the case as they have great insurance and security.

The more exchanges we see fail and the more people that lose funds is going to create a huge barrier in getting casual investors into the crypto space, which is a driving force for mass adoption. Something needs to change in terms of central exchanges, whether that’s through regulations or security measures, I don’t know.

What exactly would it take for an exchange to be trustworthy? I know personally it will be very difficult for me to get that trust at this point, but maybe something can be put in place to put the general sentiment more positive for investors.