My reading of the case was that it was both.

And here is another little tidbit for those who don't wish to believe that there was any concept of identifying tartans before the 19th century.

'Every isle differs from each other in their fancy of making plads, as to the stripes and Breath and Colours. This Humour is as different thro the main land of the Highlands in-so-far that they who have seen those places, are able, at the first view of a man's plad, to guess the place of his residence...'. So said Martin Martin writing in 1703, making the first documented reference to tartan as a means of identification.
So while the current clan tartans were not created until the 19th century, there was something similar at the end of the 17th and the beginning of the 18th century before the Act of Proscription although it was based on region and not clan (with the caveat that the concentration of a clan in a region did tend to also give some clan connection to a regional tartan).

Personally, I see no reason to doubt the validity of the idea that there was once long ago a system of regional preference for certain weaves that was lost in time due to the proscription.

The very fact that some Chiefs chose to ask the oldest surviving members of their clans to remember back to the time before Culloden to determine what their clan tartans were suggests that there was at least some idea that a concept like that existed in the misty past and that not all designs were based on the whims of tartan makers.

And according to a MacKay historian, the MacKay Highlanders prior to their being subsumed by other regiments were clad in a tartan upon which the Modern MacKay was based and which itself was based on an even older tartan common to the entire region. The MacKays are quite proud of their independent military history, as evidenced by this quote of our accomplishments:

The best known achievements of the Clan Mackay, as distinct from the ruling house have been on the battlefield. After the medieval phase of clan warfare, they manned a series of famous regiments. The original Mackay force performed valiantly in the Thirty Years war, notably at the defence of the Pass of Oldenburg. This was the first regiment to adopt highland dress as its official uniform. Mackay units fought on the government side in the Jacobite risings of 1715 and 1745, they formed the bulk of the first Sutherland Fencibles formed in 1759 and the Reay Fencibles raised in 1793. The Sutherland Highlanders consisted largely of Mackays recruited in Strathnaver in 1800. This regiment formed the "thin red line" at Balaclava and survived to modern times by amalgamation with the Argyles. The famous lone piper at Waterloo was a Mackay. In this part of the Highlands, people are still mainly direct descendants of original clansmen.
Now of course, there are quite a few who would relegate the belief in the use of at least regional tartans prior to Culloden to the status of myth and fantasy.

However, I for one do not believe that the true answer is at all settled on this point. There is plenty of evidence to show that the modern system of clan tartans evolved in the 19th century. However, there seems to be a decent amount of evidence to show that a regional system of tartans (which tended to be quite close to a clan system for some areas because of simple numbers of a given clan in an area) was in place prior to the proscription.

The best anyone should be able to say is that more research is required. With the amount of evidence currently available, I feel it incorrect to state categorically that there was no such system at all until the 19th century.