I agree that it's poor regulation and a gross overreach. The arrest of the Tornado Cash developer is particularly twisted. But if the powers that be feel threatened, we can't expect them to play fair. I hope you are correct that they back down, but personally I think they'll continue to tighten the screws if anything.

That said, I think this is a useful wake-up call. For too long now various protocols have gotten away with marketing themselves as "decentralised" when in reality they are anything but. They've gotten away with this because they haven't existed in an adverserial environment where decentralisation mattered. Seems like that might be changing.