The intent sounds fine, but as @[email protected] points out, it offloads the actual responsibility of filtering on MusicBrainz and WikiData.
It's not hard to imagine MusicBrainz being flooded by users trying to circumvent bans by editing tags. Or incorrectly tagging bands they don't like or agree with to get them banned.
Funkwhale probably isn't big enough in itself to make a huge splash, but this proposed ban does add another target to the extreme right's hit list. It seems a little iffy to me to make an open project like MusicBrainz that target?