Western governments claim that they promote freedom in the world. They call themselves "democratic" and "liberal".
We all know that this is nothing but a front. No democratic country is actually totally free. As long as we are under the control of government, there is always that authority over us that will never disappear.
Thus: Western governments should re-think their stance about cryptocurrency privacy. If they want to fight authoritarian dictatorships, they should not treat their citizens like them. Instead, they should respect their freedom to transact privately.
To be fair, I think a lot of the governments are now rethinking their stance on bitcoin. Though not as much as because of the things you have said but mainly due to profit they can get. Still, I believe it is progress that they are making.