At that point for most uses BTC will be no different than electronic fiat money, yes it can't be debased (although global macroeconomics in practice affects its price, too), and it can't be as easily frozen/confiscated, but if you know the HODLer's identity, you can often put pressure on them (from the authorities' point of view), but there will be less freedom to buy/sell/spend compared with cash or commodities such as gold or silver.
At that point, bitcoin becomes worse than cash. Bitcoin is great exactly because it is censorship resistant, it can be as private as you want it to be, and it cannot be controlled by third parties. If you are prevented from spending your coins without doxxing yourself to a third party, then bitcoin has failed to be private, be censorship resistant, or to be free from third party control. There have also been attempts (thankfully, all failed) to censor transactions at the mining level by (so far a tiny minority of) miners collaborating with blockchain analysis entities and refusing to mine certain transactions. As I've said before, if I can't spend my bitcoin without completing KYC or without some third party giving me "approval", then for me, bitcoin will have failed. At that point, it is worse than cash, which although based on the terrible fiat system can at least still be spend privately and without third party control.
Unfortunately, we the wide Bitcoin community have failed to adequately react in time, especially those of us who have been around for longer. (Whether it would have made enough difference is another matter...)
I don't think it is too late by any means. There is constant progress being made in terms of peer to peer trading, decentralized exchanges, mixers, privacy wallets and techniques, and so forth. Even without any of these things, if people just stopped throwing their personal information out like confetti then much of this damage could be stopped or even reversed. The problem is all the newbies coming to this space are told by people who have never traded P2P to go sign up with Coinbase or Binance because P2P trading is too "complicated" or they are "more likely to be scammed".