yes, could. in practice even functioning exchanges opt not to bother. it is a poor practice we should call out, this is definitely something that a regulatory framework could address and carve out procedures for. (people could do spam attacks, so there is a line on how much to bother)

Once there are regulations that are penned and enforced by a centralised authority what is the use of cryptocurrency?

running and using an exchange to custody assets is entirely optional and also not the point of cryptocurrency

the regulations apply to people that chose to do that and don't apply to people that use cryptocurrency