IMO, this will have several negative consequences:
Reduce network security. 100% slashing is terrifying and the risk/return won’t be there for many holders. (I know Cosmos holders who think 5% slashing vs a 9% annualized yield isn’t worth the risk). So you’ll have fewer people stake and put the network at risk.
Increase centralization. Increased risks means increased diligence on your validators. This means the big guys (via brand, advertising, et al) get bigger.
It would set back insurance significantly. Insurance rates for custody/smart contract risk are ~.5%-2% of the funds at risk. If you increase the funds at risk from 5% to 100%, you increase the cost of insurance by 20X. If a typical validator takes 10% of a 10% annualized yield, they are only earning 1% of the funds at risk annually. So insurance becomes economically unviable.
If you want more decentralization, lower the requirements on validators. Make it easy to get started, run on a crappy insecure machine, take away risks of doing it incorrectly. The tradeoff here is performance but you get lots of decentralization.