Well for one taxation on a decentralized system like cryptocurrencies would be hard if not outright impossible. The fact that the transactions itself is nigh-untraceable already speaks for itself. Then again what a government can do is have ISPs operating within their country impose website restrictions on key sites where cryptocurrencies mostly operate, but this will be counterintuitive since what they want to happen is to tax let's say a cryptocurrency game. So they're basically in a deadlock situation where they ought to allow these games to be operable within their territories without tax until they find a surefire way to do so.
The state should not prohibit citizens from accessing encrypted games without reason.
When the game endangers the health of most citizens.
The state will take action to prohibit the use or access of this encrypted game.
The government will make all kinds of excuses to impose these bans and will mask it as reasons. We cannot do anything about this type of scenario but what we can do though is to stand up against malpractice within the confines of the government. If you think taxing or imposing a ban on cryptocurrency games is unjustified then there should be protests and movements that the people who support the operation of cryptocurrency games and cryptocurrencies in general are to make to ensure that their voices are heard, lest these efforts will all be wasted.