If you try to run an unlicensed exchange without KYC on AWS, you will get shut down pretty quick.
I think the government will look at Solana and say its too complicated to shut down.
That wouldn't really work for Bitcoin or other PoW coins. They could shut down big mines and new ones would pop up. Of course they could instead invest a lot in both seizing mines and building their own and 51% the network... that's always a risk and any large enough nation state could do it.
If so, where is the line of what they will / won't remove? I fear we get into a Facebook like situation where nobody is happy where that line is drawn. Could legitimate projects be shut down because a government has deemed them illegal because they aren't complying with regulations?
Well potentially if enough validators forked the chain before the material was added and were able to build a longer chain than the one with the classified material, but even then it would be pointless as the previous chain still exists and will have been distributed to every node.
The question is, why would they want to remove it? Solana is a global blockchain, not a US government entity. If they were to abide by US government requests, it would be only fair to also abide by the requests of other governments - but what if North Korea wanted information removed? As you said, where do we draw the line over what is a "valid" request?
And more importantly, who draws the line? There is no single Solana entity, it is a group of validators who would decide this. Achieving consensus on something like this would never happen, especially among a group of people who are trying to be resistant to government censorship.
The next step in cryptocurrency technology is to decentralize the exchanges themselves. Ideally it should be impossible to shut them down, regulate them or even understand what's going on. Governments will either give up or become tyrants in the process of fighting increasingly subversive technology. We'll find their limits.