Until today, governments around the world are mostly too big. Being big costs a lot of money, which answers the question of the purpose of taxation.

Taxation comes in many forms and sizes -

VAT/GST aka Consumption Tax
Income Taxes
Other forms of Taxes

They all function by means of taxing after the "transaction" has occured. Since Cryptocurrencies cannot be tracked so easily, this makes taxation almost impossible to police. Thus, the war on cryptocurrency is REAL, but the future is somewhere in between - where Governments and Crypto adopters adopt the middle ground.