My theory is that this is a dream world, made by Coulson, who thinks the superheroes are too much power, with no control. I think Coulson’s ideal world is no super heroes except the Squadron Supreme. But like all wishes that come true, there is always a loophole in any ideal concept. Coulson’s dream had a flaw, in that some characters knew it wasn’t real, and, a simple thing like restoring Captain America unravels the whole stitching. I think the world is something like what Franklin Richards dreamed up in the original Heroes Reborn, but designed by Coulson.
What are your theories?