> Why couldn't we fragment and distribute one set of those keys among multiple legal entities?
There would be thousands if not millions of legitimate decryptions every year. At each instance all of the fragments will need to be put together, creating an opportunity for the data to be exfiltrated.
Additionally your making the assumption that legal agencies will be able to securely store these keys long term (I.e forever). Regardless of your view on the operational and security competency of these agencies, it’s extreme difficulty to keep cryptographic keys secure long term if you need to be able to access them on a regular basis.
Even if you don’t think most criminal organisations will manage this, you can pretty much guarantee that large nation state actors like China and Russia will find a way to get hold of these keys. You then give your largest competitors the ability to seriously damage your economy or steal secrets by either using the keys themselves, or leaking them on the internet. Suddenly every single message sent by every citizen, politician, bank, weapons company etc becomes public for all to see.
> This is true, but defaults matter. If the US makes a law regarding encryption, Google, Apple, Amazon, Microsoft, Facebook, etc are all going to follow it. You still might be able to roll your own encryption
You will 100% be able to roll your own, and trivially too. You’ll just need to go to GitHub and grab the source code, or pre-built binaries for a working crypto system, of which there are many. Banning the big companies from using crypto isn’t enough, you also need to ban anyone from talking about crypto as well.
This is very different to money laundering rules. Realistically you can’t opt out of the modern financial system, regardless of what blockchain proponents say, so introducing rules to gatekeep money flows at system choke points makes sense. Also one ability to censor money at choke points doesn’t also create an opportunity for enemies to exploit those same choke points.
The money laundering equivalent of crypto censorship would be like the US deciding that it was going to switch to Bitcoin so that all transactions are public and accessible to law enforcement. Then just kinda hoping that a country like China isn’t going to launch a 51% attack.