Deposit insurance is unhelpful to the state

It is the central bank which enables the commercial banks to attach their credit to that of the state. Via deposit insurance the broad money issued by the commercial banks is given the same value as that of the base money irrespective of the credit-worthiness of the banks. The banks are able to get into as much debt as they like and in contrast to the state they have little interest in protecting the currency. The state (we must assume) has an interest in preventing inflation because this could have a negative impact on the voters but the banks have no such concerns. The banks are able to extend the money supply to an excessive amount due to the presence of central banks and deposit insurance.

If the government allows the central bank to protect the banks in this way (and this is the major function of the central bank) than the currency of the state (the base money) will be threatened with dilution. By enabling the central bank to protect the commercial banks the state exposes its own currency to hyperinflation which would bring down the state itself in any meaningful sense. The state is vulnerable to collapse merely because it provides deposit insurance to the banks and doesn't constrain the activities of the central bank.

The central bank and deposit insurance have the capacity to destroy the government via hyperinflation because the commercial banks will issue unlimited credit if there are no constraints on them doing so.