But how would developers mitigate this in the next iteration of the "next Wasabi"? Or what other alternatives can be built, using another path, to protect and preserve Bitcoin's fungibility? Offchain layer with Zero-Knowledge Proofs perhaps? Is that possible?
Best alternative wallet I see is Mercury wallet that is working on totally different principle of swaping private keys in secure way, in that way fees are much lower and privacy can be much higher.
I don't think regulators will be able to do anything with Marcury wallet, but there is always good old mixers we all know, or using Lightning Network.