#1 Bitcoin is not the only currency used with criminal activity. US dollar bills (cash) and many other currencies were used for criminal activities far before Bitcoin came along. In fact, criminals are still using cash... and the government hasn't made using cash illegal.
It's not only not the only currency, it's probably among the least used actually and this is statistically proven to be less than 1% of illicit transactions by many sources.
Also it's a really bad choice to be used for illegal purposes because you can't remove the money trail. You can hide it or make it difficult to track but can't completely wipe it unlike other money payments.