But you correctly said that today the situation with the use of cryptocurrency is very difficult, since cryptocurrency is often used to finance crime.
How much of crypto transactions are used to finance transactions? Where did you get the numbers?
Based on this, I believe that cryptocurrency should not only be supported at the legislative level, but also controlled, in order to avoid any problems.
The control level is probably around exchanges, the marketplace, and KYC. However, limiting the number of addresses a person owns, how much they store cryptos, where do they send the money, etc is going to be difficult. This is already happening btw, but not all countries do this. But to fully control the network, that would be impossible unless you want to control all the nodes & mining power.
Whatever technology exists in this world, if it is contrary to the law of any party, law enforcement agencies will immediately be interested in this product. Based on this, I believe that it makes no sense to care about anonymity and hide the presence of your cryptocurrency funds, since while you are not engaged in illegal actions with the help of cryptocurrency, nothing threatens the person.
Your government (or anyone who has the data) can hunt you down if they wish to. They can $5 wrench you multiple times to get your crypto and use it on their own. Also, just because there is no direct threat, doesn't mean you should not care about your own privacy. Imagine someone spamming your e-mail because they know you have 500 bitcoin.