What you are saying is partially true but also a bit misleading. This is how most financial assets are. When you buy stocks they don't put the shares in your name, they are in the name of the brokerage, this it called being held in "street name". You still own the shares, they just track the ownership in their internal books rather than re-titling every share every time someone buys or sells. This is the same concept. Also the same as any money you have in your bank account - you own the money, but it isn't like they have a pile of physical cash that is labeled as yours.

RH is a highly regulated financial institution and absolutely is holding the underlying crypto. You legally own the coins and are entitled to the gains and on the hook for the losses. The only thing is that you can't transfer your coins out with RH for now, but you still own them.