Interesting question. But keep in mind they are government which means they have access to almost everything, even great people, hackers, it, computer geniuses etc. That is why I believe they could hire very smart people to help them regulate cryptos, or maybe they are already doing it, they are only waiting to apply it officially, who knows? Never underestimate the government.
Yeah government can do it if they wanted to but this will affect how people invested in crypto as they believe that they want to have no control from the government and being decentralize currency without the use of third party. Maybe government can collect taxes from crypto if they have the control on all exchanges.
I think the government really wants the control in crypto to happen. they will not care about the feelings of users who want decentralization or not what the government wants is legalization that can control crypto users. but the government doesn't know how