Government can only regulate bitcoin and crypto if you store them on centrazlied exchanges. Government can get data from these exchanges as you have done KYC on those exchanges. They can tax you on the capitical gains or crypto stored on the exchanges.
If, on the other hand, you store crypto in decentrazlied wallets and exchanges, the government and financial institutions have no access to those places and they have no control over them.
There is a fine line between making it legal and regulations. If it is legal in a nation and the regulations are laxed then you could use centralized exchanges and you could pay taxes and you could basically just accept it as it is. However, if you dislike it and think that it is not doing a good job and your government should reconsider the regulations, or even if they made it a banned thing, then you could totally consider using the decentralized places as well.
I personally like the fact that p2p is a thing even in china, where government is very harsh, which shows that people will continue to use it under even the most difficult possible situations.