But what can we do, do we fold our arms and keep allowing innocent investors fall victims of these scammers or allow government to completely declare cryptocurrency illegal when laundering becomes too much ?

Yes, the system promised anonymity and like you see in the case of Binance, they are not completely imposing the KYC, that is why we are left with two options, not to get verified and have limit transactions and get verified to have unlimited transaction, and why should we even be so bothered about our identity if our hands are clean, only a criminal gets scared of being caught and in turn protects his or her identity.