It doesn't. The last real application of Sia that I heard of during the previous crypto boom basically sounded like renting your HD space out to people who would potentially use it to store illegal content.
Child porn is the emotional argument, the only possible case where most people might agree that some content can be illegal. A more representative scenario is illegal copies of music or a political pamphlet in China.
1) If childporn was not banned, how many people would consume that content anyway?
2) What about hyper-photorealistic childporn movies with fictional characters and future rendering technologies? How will you tell the video is true or not and worth to be removed?
Otherwise encrypted illegal content is stored on everyone's computers, and technically makes them potential felons. And thanks to the magic of the blockchain, it's indelibly recorded forever.
Infosec usually, the difference here is you're taking on the risk and data knowingly and willfully. "Officer, it's part of a blockchain thing called Sia" is unlikely to satiate them.