It's an interesting take on it.
I think the wast majority of people (around the world even) are not going to declare their cryptos. Because it would take away a lot of the promised anonymity of them.
But do you think group 1 is large enough to affect anything? Of course if it means institutional investors are finally jumping on board big time, then I definitely see your point.
I believe the institutional investors fall into group 1 and yes, they will affect a lot because of the amount of money that's going to come into the market. Once the SEC makes Goldman Sach's backed Circle the first fully regulated exchange in the U.S. watch out because the money is coming.
I see most of the average investors going the route of decentralized exchanges.
The decentralized exchanges had better have top notch security to draw any large investors in my humble opinion.