Well, it's very possible that when you purchase at a grocery store, you just pay with Bitcoin and they'll never know who you are. But what about the point where you purchase that Bitcoin? Sure, most of us use our bank to purchase Bitcoin on an exchange, so at that point, we've already revealed our identity to the exchange. Since the government regulates exchanges and banks, they could obtain that information.
Yeah, that is true, but there are also ways to buy BTC without using a kyc service, i.e. there are p2p exchanges that do not require kyc and you can purchase BTC from services like that, you can also purchase BTC directly from people you know, that is if you have a trusted pal who can sell to you sometimes. There are also no-kyc centralized services like Mexc, they allow you trade up to a certain amount without requiring your personal information.