These resources should be spent lessening the impact rather than trying to completely control it.
You absolutely can. Maybe you can't effectively enforce that regulation but you can regulate and you can take measures that make violating the regulation impractical or risky for most people. By the way, the "crypto-wars" never ended and are ongoing all around the world (UK, EU, India, US...)
Again it sounds extreme but in an extreme situation it could happen / not impossible.