Now one thing I'm wondering is... why are we not improving Bitcoin's fungibility and privacy? Is it that we're scared of the governments' reaction to it?
Wasn't Bitcoin released as a counterattack against the fiat system? What are we scared for precisely? If Bitcoin anonymity is an issue, then what's the difference between that and using CoinJoins/Mixers?

Doing a complete overhaul of the protocol to add privacy features is not easy and probably won't be well received, if anything politics would play a huge part in this other than the technical challenge. If you're able to, I think making a BIP with features specific to Bitcoin is possible.
I don't think Bitcoin should have to adapt to solve every single issue out there, it simply can't. Altcoins can be much more versatile in this aspect and Bitcoin should focus on its core ideas from when it was created in 2009.
Another quite interesting/funny thing is.. Binance blocks coins coming from mixers/coinjoins, yet XMR can easily be deposited without issues. This further proves that the more we comply to what the government wants, the more they'll make it sound like privacy is a bad thing. They literally want to say that if you want to be anonymous on a public blockchain, you're a suspect.. while using XMR does not make you one since it has privacy on by default. That's how I take it.. otherwise, where's the logic?
I mean, if Binance blocks XMR, then they'll lose out on trading any of that currency pair right? What's the point with privacy if Binance already collects so much information on you?
If your exchange blocks transactions, then you probably shouldn't use it. Actual P2P exchange like Bisq doesn't have this issue. Bitcoin is fungible, 1 BTC = 1 BTC.