I would support the DAO providing all the liquidity as a service to the community and cutting off the SPS rewards to LPs
But in effect, this accomplishes essentially the same goal, except on a proportionate basis. If the DAO is 100% of liquidity, it has all the rewards (which essentially just means they are not paid, and thus reserved for the era after sps-whitepaper-distribution). If some Liquidity Providers want to participate still, they will still earn SPS, in proportion to their relative participation. That doesn't really seem like a bad precedent to set?
I would also add, that this proposal aligns well with traditional economic theory, in that it should encourage capital to gravitate away from the pools where it is least needed, where if the DAO's liquidity is already sufficient then any extra liquidity is inefficient and could be better deployed elsewhere.
However, I'll agree that we shouldn't just assume that no private Liquidity Providers are needed. I don't think this should be a one-stop solution - this is only "Part 1".
After all, we are still allocating proportionately based on pools that were set years ago, and I think it's worth re-examining the ratios.
I think that once we reduce the reliance on "LP social security", we will see a new equilibrium, and at that point, perhaps we use the resulting new equilibrium point to determine whether the SPS allocated to each LP pool should change. We can re-calibrate the LP pool allocations to direct private capital into those pools that are seeing higher volume and/or higher slippage, where they may need more liquidity. [Perhaps algorithmically based on slippage/trading volume, etc]. I don't know the right answer, but it seems like that type of recalibration is overdue, and it would need a think tank and a "Part 2" proposal.