We should legalize all drugs in Asgardia.
I come from a mental health professional background. I have seen first-hand the experience of individuals who live with addictions being unable to find a "safe" supply of what is often their only source of medicine. The result, is suicide. The result, is mental illness. The result, is sickness...precisely what prohibition is supposed to prevent.
When we make drugs illegal, we open the market up to marijuana that is significantly more dangerous; to tobacco that is significantly more dangerous; to alcohol that exceeds any safe alcohol percentage. We cannot test illegal drugs in labs to ensure that they are what a drug dealer says they are. Moreover, we open "needle" addicts up to the risk of HIV/AIDS and other bacterial contamination from unsafe needle sharing, which is of little concern to addicts. People use drugs--legal and illegal--as a form of self-medication; that is, their inability to access traditional means of care causes them to access the only types of "medicine" they can find. A person with depression might choose to drink hard alcohol bought at the corner store simply because it feels good, even though alcohol clearly makes their depression worse.
My professional and personal opinion is that a focus on education and harm prevention work is much more beneficial. We need to concentrate on educating all Asgardians about how to use drugs and alcohol in a safe and respectful way, while clearly and accurately stating each drug's side-effect. Canada has many "safe needle clinics" that provide a clinical atmosphere and addiction services on-site. Hard drug use should be strongly discouraged.
Besides that, legalizing drugs is fantastic for the economy. The legal marijuana industry in Colorado is worth $6.7 billion.
EDIT: Missed the other part of the question, sorry. Hard drugs should be regulated; soft drugs should only be prohibited from being used in public spaces / public events. There could be a special tax on drugs and alcohol (the "Sin Tax", as English countries have called it), but it has not really worked all that well in the past.