With modern retina displays it's not really an issue. 16x16 icon on iPhone 8 display will have a size of 1,2 mm. 10mm icon will have 128x128 resolution with enough pixels to provide every detail.
Except high density displays are not really that common outside smartphones and the Apple world. It's probably safe to say most people still work on regular 1080p monitors at 90-100 dpi or at best on 1440p with slightly higher dpi. So an SVG with design resolution of 512×512 will look like a blurry mess when scaled down to 16×16. We'll get there eventually but optimising for low-density displays is still a very valid and reasonable thing to consider.
Even smartphones sometimes have lower-resolution displays. 720p resolution is still rather common at the low end, and that's something where a 'pixel perfect' 16x16 icon can still make some sense.
