What kind of self-regulating system of taxation are you talking about? Lol. Politicians couldn't keep their hands out of the budget. What they do and politics? Maybe you believe that they go into politics to make the country better? They will never give control over taxes and nothing to even speak on this subject.
For that reason I am sure most of them will do anything in their power to maintain the current system the world uses after all, it is the most convenient system for them to be corrupt. If there would be a self regulating system of taxation, they wouldn't be able to do what they usually do. It will be hard to convince them to switch with this self regulating system because like you said they aren't in it to make the country better but to give themselves power and money.
Politicians do not disdain any methods to achieve their goals. I'm afraid that in order to prohibit the use of bitcoins, they can organize large-scale provocation. Will be implemented any large-scale terrorist attack and it will use bitcoin. Then, under the guise that it is used by terrorists he will be banned.
And by all means it really signify how terrifying the government can do based on your analogy. It is not shocking at all, because if we think about it clearly, they will really lose their power when it comes to this field, maybe they are superior enough in making laws, but in crypto, they are just mere citizens, and because of their pride and greed they will much likely use every means to provoke and prevent worst case scenarios from happening.