I think Bitcoin can handle both regulated scenarios and unregulated scenarios, just like paper money is handled legally and illegally today.

Full traceability will be the norm for everyday consumers and businesses using green addresses or some other trust mechanism, but with the possibility of being used anonymously with enough caution. The FBI, IRS, or equivalent would step at the same time and in the same way as if they are catching millions of paper US dollars going across the border.

The question is, at what quantity of 'anonymous' Bitcoins does the regulation begin? I think for USD bills it starts raising eyebrows with $6,000-10,000 moving around...