The goal is also to develop systems that are significantly more capable than current systems. And those systems could be misused when terrorists gain access to them. What about that is "unhinged"?

It's unhinged because one could make slippery slope arguments about any technology killing millions of people.

In the cold war era, the government didn't even want cryptography to become generally available. I mean, what if Soviet spies use it to communicate with each other and the government can't decode what they're saying?

People who are worried about technology killing people ought to focus their efforts on the technologies that we actually know kill people, like guns and cigarettes. (Oh but, those industries are donating money to the politicians, so they conveniently don't care much.)

Cryptography can't be used to produce weapons of mass destruction. It's a purely defensive technology. Engineered superviruses are a whole different caliber.

Wrong, cryptography is used to conceal the communications of people building nuclear weapons. It still should not be regulated.

Cryptography is just as useless for creating nuclear weapons as it is for creating bioweapons. AIs that help make WMDs are on a very different level.