This is exactly what I was thinking. This has made me lose a lot of faith in crypto, not that I had a ton of faith to begin with. But I keep hearing people talk about blacklisting addresses and blocking transactions. That's scary stuff. How can people ever feel comfortable storing large amounts of money in crypto if the big players can simply block their address and make it near impossible to liquidize their money? I feel like this incident is showing Bitcoin's (at least what Bitcoin has grown to become) true colors.

That is not what's going on here. This is a company protecting its users from a scam. If you don't want that protection, it's quite feasible to not use that company and use one that doesn't do that, or manage your own wallet, or whatever.

If you’re a fan of crypto for its independence and decentralisation, you aren’t going to be storing your coins on coinbase. You will store them on your own hardware.

Moving coins between wallets is simple, it would not be possible to simply block an address to prevent cashing out.