The basic logic here is pretty clear imo. Passwords are still symmetric factors, and they're also completely unstandardized. So you still have to do a significant amount of manual management crap that should not exist, deal with UI that should not exist, and you still have to do some stuff if the other side (service provider) gets hacked. If we used bog standard pub/priv keys instead, then everything could become universally better. There'd be no need to worry about password policies, whether there is a character limit or not, how well and consistently individuals handle it, or anything like that ever again. Nor care if a site is breached, literally no action required because the site would only have the public key, they could publish it in clear text and it still wouldn't help attackers authenticate a single iota. Plus things like phishing and so on go away, because same thing, if the user has their agent browser to a malicious link or the like, and then it presents their pubkey, it still wouldn't do anything and the agent can't be fooled by similar looking to humans domains or anything. The agent would expect the service to present the proper signed request and anything else wouldn't work. Conceptually everything could be automated and standard without any sort of silo, all software could speak the same standard simple key format and everyone could back that up and sync it any way they wanted.

Unfortunately as is so often the case these days there's a lot of perverse incentives and players who can't resist the urge to try to add extra functionality in on top rather then just going for the low hanging fruit in a solid way first. So we've seen a confusing muddle, of existing players with financial interests who make money by helping lower the pain of the garbage that is password based mutal auth, those who see new chances to try to silo, those who want to shove in attestation and differences in password backing for good and bad reasons, mixing in concepts of hardware backing that are unnecessary, etc. I'm still hopeful something will come out of it in the end but it's been a real bummer to see how it's played out.