It might be hard to enforce for every instance but even if only 1% of instance admins get strongly worded letters threatening fines if they don't follow the law, I guarantee you that many more will just decide that it's not worth the risk, they close their instances and we end up with even fewer users than before.

Between server costs, moderation effort, discussions whether certain instances should be defederated, and existing legal requirements (like removal requests for copyrighted or illegal material), hosting an instance is already a thankless job and most admins do it for free. The last thing we need is uncontrolled growth that attracts lawmakers' attention as well as users that don't share our values and require even more moderation.

Let the fediverse grow naturally. We don't need to shut anyone out but we shouldn't actively advertise to the whole world either. Recruit your friends who might be interested in the content and culture we already have. Let the rest of the world find their own thing. That way, we can maybe stay under the radar for a couple more years before the problems start.