51% wouldn't directly render it worthless perse.
If you replaced the past year with empty blocks, you would most certainly render it worthless, because it would be considered completely unreliable.
Stricter regulations is one (we facing it now) and it's more subtle.
KYC is a major attack, correct. But, bitcoin is still a robust network, even with KYC. People can still buy bitcoin and "lose them" on boating accidents. Not to mention that there are solutions that evade KYC, and allow you to trade peer-to-peer. It's gold, but even better, and I remind you that they even confiscated gold. If I were "them", I'd feel very sweaty, because it'd be now possible for people to use an alternative, a currency that I hold absolutely no control in its supply.
Rather than attacking, the government realize it's better to coexist
The government might realize it's better, but "they" are not the government exactly. And they definitely have nearly everything to lose if a free market currency with hard cap coexists with anti-free market, infinite-in-supply fiat currency. The fiat currency can continue operating as medium of exchange (because of legal tender laws), but if the cash balances are held in bitcoin, these money changers cannot effectively steal purchasing power via inflation, and their whole parasitic, shadow kingdom starts breaking apart.