So you're basically asking are witnesses liable for the information stored on their nodes. It's an old question.

I personally believe the answer is no. That's the short of it. The long of it is as follows.

This is something that requires a universal approach by regulatory bodies (that are not lobby groups or corporations aka private-interest entities). For example, most countries agree that blatantly allowing money laundering and creating utilities to suit organized criminals is something that'll be dealt with a heavy hand. However, it still exists. The other day while on Twitter I came across an account selling fake passports that resemble real ones. That account was taken down a few minutes later. That data is likely still backed up on Twitter somewhere but it's not available from the frontend. Reasonable steps have been taken.

In Hive's case, we can't edit the content of the blocks so the data will always be there. But in the case of extremes like terrorist material or child pornography we must show that we've done everything possible to prevent it's dissemination. Part of each legal case is the element of intent. If a blockchain is particularly designed to promote extreme illegal activity, that's likely will be viewed differently than when the blockchain and its operators do everything possible to be a legitimate product.

Hivewatchers are not the regulators of content because for content to be in scope for Hivewatchers it must be already on the chain. Therefore these two elements have nothing to do with one another. Hivewatchers just mitigates the risk of activities that are sure to attract negative attention such as, for example, promoting fraud on Hive. The presence or absence of Hivewatchers isn't going to matter to someone pursuing legal action against Hive, although it may soften the blow when they see that effort was made to prevent fraud.

Hivewatchers in general can 1. send a message in terms of a comment and 2. downvote some rewards away. But what it can't do is prevent you from posting, or add an account that's blacklisted to something that hides it on a frontend, or make the account owner unable to log in, or freeze transaction, etc. Hivewatchers is married to its scope. No matter what people say about it, and often people claim all kinds of crap because they want to justify being caught for something they knew was wrong but they tried to get away with, it doesn't move out of scope. It's like the Rook on a chessboard. It moves a certain way and it cannot move in any way it's not meant to move.

The problem with this entire discussion is we're all tired of the big-tech and their relentless hunting down of everyone, regardless of what they believe, who doesn't fit into their narrative. They provided giant platforms for years, everyone started using them, and suddenly accounts are being deleted. I lost countless accounts myself. But we're now so used to constantly hearing about this and dealing with it that we're transferring these attitudes to a completely different technology which is the Hive blockchain. I also run the Hive fediverse portal as I mentioned yesterday and I see the same thing. Blockchain and fediverse tech are both decentralized and have nothing to do with mainstream social media tech. But people have this Pavlov's Dogs reaction now because it's ingrained and the mainstream media hammers it all in.