It's the registry, not the registrar. I made a website that tries to help explain some of the lesser known nuances and risks relating to domains. The section about domain reclassification is based on first hand experience and is especially interesting IMO:

https://tldrisk.com/beyond-basics/reclassification/

> This basically makes the entire TLD unviable for serious use.

It doesn't just make the TLD in question unusable. I think it makes most of the new gTLDs unusable. Registries can enact policies and systems like this, regardless of the detriment to registrants, due to a lack of oversight and registrant consideration by ICANN. That creates uncertainty and makes it pragmatic for registrants to simply choose the gTLDs with lots of history and precedence; .com, .org, etc..

The only two TLDs I'd personally rely on are .com (gTLD) and .ca (ccTLD).