Technology
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I agree on both points. Also I think it's important to characterize the 'innovation' of self driving as more social-economic than technological.
The component systems- sensing, processing, communications, power, etc- have a wide range of engineering applications and research and development will inevitably continue no matter the future of self-driving. Self driving only solves a very particular social-economic-technological issue that only exists because of how humans historically chose to address the same issue with older technology. Self driving is more of a product than a 'technology' in my book.
So my point there is that I don't think a ban on full self driving really qualifies as 'holding back innovation' at all. It's just telling companies not to develop a specific product. Hyperbolic example but nobody would say banning companies from creating a nuclear powered oven was 'holding back innovation'. If anything forcing us to re-envision human transportation without integrating into legacy requirements advances innovation more than just trying to use AI to solve the problems created by using humans to solve the original problem of how to move humans around in cars.
I see it the same way, but an incredible amount of people I've discussed this with say that its stupid to hold back technological innovation "like self-driving cars". Its an unnecessary piece of technology.
I also just think the whole ethical complication is fucked. The way we have it now, every driver is responsible for their actions and no driver ever glitches out on the freeway (and if they do, they bear the consequences). Imagine a man's wife and kids getting killed by a drunk driver vs a self-driving car. In one scenario you can clearly place blame, and take action in a much more meaningful way than just suing a car manufacturer.