Personally I think governments are having a hard time trying to control crypto because even they do not understand it completely. Its decentralized nature makes it hard for the government to just grab it by its neck and kill it. Crypto is a very gray area if you will so regulations must be wisely implemented.
What makes you think the governments don't understand cryptocurrencies or the blockchain system? Apart from a few third-world countries where government officials are chosen based on power and most of them are a bunch of illiterates, all other governments consist of people who are very well-educated and understand everything very clearly, they live in the same world as we do. So if we can understand everything, they can understand it too.
There is no rocket science in it, everything is very clear and easily understandable, and anyone conducting a bit of research can understand everything. When we talk about regulations, they know very well what they need to do, and they have regulated platforms and things where they know most people would go at some point, such as centralized exchanges that we use to convert our cryptocurrencies into fiat through the P2P marketplaces.
These platforms ask us to verify our identities before we use their services, why so? Because they are regulated. So, in a country where the government has regulations in place, a person within that country using a centralized P2P exchange is easily exposed to them.