Maybe not “exactly” but for key management roughly something like the Ledger Nano X (has to come down 10x in price obv): Small separate device that can be used to sign transactions with. Can be used with smartphone wirelessly. This device should also work seamlessly for general 2FA and auth/identification, preferably usable with government services.
Apart from being sold directly to consumers, it could be issued by providers of banking services (lending or payments for example) to clients.
You would also have service providers offering key recovery services (could be shamired)
Okay, I will assume that the government is either caring, doesn't care or incompetent (meaning not actively suppressing this). You forgot the mining side, so how do you solve that? Because, for example, the 50%+1 problem is still there, right, so if you really want a decentralised system, you also need to solve this.
Also, your solution doesn't work against oppressive governments. (Again, I don't have a solution to that, just pointing out that they do exist.)
See my point above. If you can memorize 12 words crypto makes this possible. No other store of value can make the same claim. No hardware wallet is required.
Apart from being sold directly to consumers, it could be issued by providers of banking services (lending or payments for example) to clients.
You would also have service providers offering key recovery services (could be shamired)