States should. A lot of their power rests on their legitimacy. They can collapse fast once that erodes.

If they cannot even keep the centre of the capital moving, seemingly ever again, the value of the currency can plummet quite quickly as people decide to move wealth into less liquid assets (or simply cash from other countries).

This seems far-fetched, but it did in the Weimar Republic too, until it became apparent it was already happening.

Edit: just to be clear I'm not saying Weiner hyperinflation resulted from a collapse in the legitimacy of the state, but moreso that collapse itself is never obvious until it's well underway.

I think they should be strong in upholding the law, but not in bossing their citizens around.

To those falling foul of the law, they feel like the same thing.

(I agree, just pointing out that the line gets muddy depending on which side you're on. A collapse of the state can be one of the worst things imaginable, in net terms.)