The theory is that if you make it too risky to possess CSAM, demand for it will drop, leading to less exploitation. I don't know if I buy that theory, but... there it is.

Compare this to the war on drugs. There is huge demand for drugs. Many drugs are highly illegal to possess, and a lot of people get jailed for possessing them. And yet most of us consider the war on drugs to be an abject failure that hasn't done much more than create inequity.

Why should something like CSAM possession be any different? I wish it was different, and these sorts of tactics would reduce this awful problem, but I'm just not convinced it does.

Known CSAM detection was one of three features they announced under the banner of child safety. Certainly they understand it is by itself an incomplete intervention for a much larger problem.