In fact, Bitcoin is more transparent than Fiat Money. Bitcoin's transparent ledger makes it possible to trace all transactions easily. If the government wants to trace the wallet of a specific individual, they can do so without hindrance. Various coin mixing services and now under KYC and AML law, meaning the government can trace you if it wants even if you use mixing service. Technically it is censorship resistant but practically I don't know how effective is it.
We all know about this but as mentioned already many times authorities sitting in governments and having controlled things are not feel better with this way so just because of this trying to control indirectly they feel it's not possible to do this all directly. KYC is also just part of this all because they need all updates about peoples involved in this all.
Personally I am not worried about bitcoin regulation because government definitely will do it in one way or other. When we prepared to face any such kind of situation then I guess there will be no problem at all on having bitcoin regulations at any near future.