Its my understandingn that Visa does offer the service to banks, they just haven't implemented it. There is to my knowledge no regulatory red tape, it's just not seem as profitable.
The banks here in Denmark har just less competitive and more entrenched than in the US
I wouldn't say that banking is particularly competitive in the US when it comes to technological/product features such as this. Out of several of my cards, only one issuer offers virtual/one-time use card numbers themselves.
My Swedish bank (Swedbank) had this service from some time in the 00's up until 2017 when they discontinued it. So they were way ahead of the game but for some reason dropped it.
The banks here in Denmark har just less competitive and more entrenched than in the US