Stable Diffusion has been kicking around in the wild for a couple of years now, and probably a million people are running it. You can't really criminalize that.

But key generation and storage can be in a hardware module, and tied to a unique device, so it would be quite difficult to hijack -- and, if you did, you'd only get very limited use out of it. So there might be a technological solution. Maybe not a perfect one, but one that's at least plausibly useful.