Really like tone controls to adjust for different speakers, rooms and especially loudness. When PROPERLY implemented (analog or digital) should be no sound degradation at all. Below is a good summation IMHO of why equipment should have tone controls. With an option to bypass them completely, there is no good reason not to have them. Douglas wrote this about analog tone controls, but applies just as well to digital ones.
Douglas Self web site:
"Tone-controls cause an audible deterioration even when set to the flat position."
This is usually blamed on "phase-shift". At the time of writing, tone controls on a preamp badly damage its chances of street (or rather sitting-room) credibility, for no good reason. Tone-controls set to 'flat' cannot possibly contribute any extra phase-shift and must be inaudible. My view is that they are absolutely indispensable for correcting room acoustics, loudspeaker shortcomings, or tonal balance of the source material, and that a lot of people are suffering sub-optimal sound as a result of this fashion. It is now commonplace for audio critics to suggest that frequency-response inadequacies should be corrected by changing loudspeakers. This is an extraordinarily expensive way of avoiding tone-controls.