Now, the sticking point is that yes, transactions can be followed through the blockchain BUT who/what has ownership of coins cannot be discovered until they are exchanged into fiat or some type of physical goods which can be linked to people & organizations. He wanted to make sure that BTC had that discovery mechanism.
That was so nice of Satoshi Nakamoto. If bitcoin is like monero, it might also not be widely used as it is today. Nearly all countries do not ban bitcoin and the discovery mechanism would be one of the reasons many countries do not ban the coin.
Satoshi understood a lot about privacy and its negative impact. He somehow knew that if Bitcoin's privacy was as completely strong as that of coin like the monero's, it would lead to more illicit activities using Bitcoin.
Exactly. But it is worth knowing that fiat is mostly used for illicit activities today. It is mostly used for money laundry, terrorism financing, ransom and bandits funding etc.