Excuse my ignorance, but it seems like this is just a case of Steam wanting to save their reputation. I don't believe this game violates any laws (at least in the US). A game where you control a character that murders people isn't a crime, so by extension, this wouldn't be one either.
I bet the game would have been approved by the ESRB or Pegi too, even if it means an 18 rating, the thing is that the developers doesnt have enough money or knowledge to get there in the first place and Steam doesnt force games to be rated. So now everyone is allowed to trash the developer and calling him a pedophile, thats how it goes.