People think:
Smile>ally and not a villian...
This is wrong, he can be a future ally but there is clearly a conflict coming with Luffy vs Loki.
Oda portrayal Loki as strongest Giant so far and he got massive hype.
You don't make such a character a ally, that is like saying Kaido(power lvl wise) would join the strawhats in elbaf as ally. That don't make sense, then you need to show a character who is even stronger than Loki and a insane strong army if he joins the strawhats as ally this arc.
Zephyr was also friendly and smiled with Luffy, also act good, yet they fought each other.
If you make Loki a ally for Elbaf>You need to show even a stronger character than Loki...
Dude killed his father, took a legendary df(which Oda clearly want to show), want to destroy Elbaf and call himself the sun god.
Literally everything leads to a battle with Luffy vs Loki.