Those who are engaging on illegal activities by the use of bitcoin they are just putting themselves in danger. Bitcoin will having a negative mark regarding that once their government knows about it and for sure it is highly possible to ban btc in their country by the government.
Physical cash is the most common medium for purchasing hard drugs, firearms and other contraband in many of the countries. Did that lead to the banning of physical cash by the governments?
Physical cash is the one that has got acceptance among most of the services. But now most of the advancing users prefer bitcoin, because of its high security than fiat. Few months back a team of hackers collapsed entire management operations of a hospital and demanded pay in terms of bitcoin to resolve it. So based upon the users need and accessibility they choose fiat and bitcoin for illegal activities.
On advanced users bitcoins will surely in demand but for traditional ways fiat will be considered still. Thats not always the case because using such situations doesnt mean it will increase the awareness into bitcoin even they demanded for bitcoin payments but we could really say that bitcoin could be used on illegal activities and asking it to anybody doesnt inlcude.