Unfortunately there are specific pieces of information that I lack to properly explain this using correct terms and specific details, but I should have enough information to explain the problem that crouch canceling is.
From my understanding, landing lag can actually cancel nontumble stun frames, and crouching upon being hit also lessens the strength of the move in some way that lessens hitstun (sometimes this turns tumble stun frames into nontumble stun frames). Since downwards DI (which causes the character to land) will cancel the majority of the stun frames via canceling nontumble stun frames, it is a major contributor to the strength of CC. So when I refer to CC in my explanation, I will be referring to holding down as a means to nullify hitstun altogether, since both factors work together very well to do so.
CC is currently a defensive option that is instantaneous, is active indefinitely, and has no penalty aside from the damage taken and the largely reduced amount of hitstun frames. The reward from CC is huge in comparison to its minimal risk. Furthermore, a character could get hit (even whiff punished) and in the middle of a combo they can utilize the CC mechanic (technically down DI and land) to nullify the rest of the hitstun.
Imagine if such a mechanic were to exist in a traditional fighter such as SF4.
For those who don't know how a Focus Attack works in SF4: A Focus attack is an option that can only absorb 1 hit and only while charging. A Focus attack has to be active for at least 10 frames before it can do the attack that has an 11 frame startup and 35 frames of recovery. The attack has to charge for at least 18 frames before it can actually do significant damage. After about 54 frames the character is forced to attack if it was not dash canceled. Forward dashes have 18 total frames on average and backdashes have 25 total frames on average. Even with such a risk/reward, the Focus Attack mechanic has received many criticisms and has been seen as a mechanic that was not healthy for the game.
Now imagine that Focus Attack had the properties of Crouch Canceling. Focus Attack would then be able to absorb any number of hits, could be active indefinitely, and can cancel instantaneously into anything instead of the required risk it currently has. Because it could cancel instantaneously you could get a free combo with faster and better attacks. Lastly you would be able to “break combos” simply by holding a button to activate such a mechanic, and even get a punish afterwards. This all may sound absurd, and it is, but this is currently how CC functions. Obviously SF4 isn't Smash and certain factors should be considered differently, but the concept of such a mechanic should still be seen as problematic in Smash for similar reasons.
CC affects MUs differently due to being heavily effective against certain characters and not very effective against others, but such an option should not exist for any MU. There should not be such a mechanic that nullifies hitstun without equivalent risk, and especially not a mechanic that could be activated after already being in hitstun.
Removing such a mechanic would also mean that crouching under grabs should no longer be a problem. Crouching would no longer be an effective option against attacks that would hit a crouching opponent, so shielding would become necessary and grabs would still beat shielding which is what grabs are designed to beat.
