The government just want to be in charge of everything, from monitoring your transaction to knowing how much people are worth financially, but Bitcoin is becoming too powerful for them too handle, which to me is understandable, but to them it's a ugly reality.
because everyone loves privacy.
I see nothing wrong with what OP said tho. Yes, Binance can trace your transactions and all, but it’s better than the government being the one tracing it. And there is no place where it’s officially stated that sooner or later Binance/other exchanges that require KYC will work together with the government.