True, and reason for concern. However:
1) This shouldn't be compared to the problem of private issuance, or fiat money
But it will make the project a failure and worthless.
Do you really think so? The project will still be censorship resistant (just not perfectly so) and have a public verifiable money supply (so no hidden counterfeiting or issuance malfeasance). Just because there's a chance that it isn't perfect for one use case doesn't mean that it's worthless. A helmet won't always save your life but it isn't considered worthless to all motorcyclists.