This is bad news but it's always bad news when there is progress with regulations. Crypto is meant to be unregulated and censorship resistant.
I will never use a stablecoin again. Expect many bitcoiners to be mad when they sell their bitcoin before bear season starts. Their stablecoins will be frozen.
It should be but that's not the case when it comes to government regulations. There is very rear chance that governments will allow any crypto in the country which they can't control. Legislation just overpowers the concept of 'censorship resistance' while make crypto very much centralised. As long as consumers are comfortable with KYC/AML and other points highlighted in OP there is no reason for government to go against crypto. To me that's just another CBDC.