There seems to be only two options: 1) allow bitcoin complete freedom 2) make it illegal to accept bitcoin as payment. The second option seems more likely at the moment, be the first is still possible
I think that the option 3) is also possible. The bitcoin will stay as a "parallel" currency "as it is" but with the certain regulation/limitation of its use. Like it is already in some countries, where bitcoin payments are acceptabile in parallel with other currencies and is used by the companies with a solid reputation.
Indeed, Bitcoin is most likely parallel currency for a while.
I'm one of the authors of the paper mentioned in that Wired article (
http://arxiv.org/abs/1406.5440).
Clearly the Bitcoin community rejected our proposal, it took even 9 hours for my pull request to be closed.
That's fine, I love Bitcoin. The key question is now how could millions of normal people start getting into Bitcoin?
Bitcoin ATM machine's legal in EU and US require photo-ID registration.
So #2, Bitcoin without a photo ID registration is illegal today in EU+US.
Option #3 means only tech savy people will get into it. It poses insurmountably high barriers for large-scale uptake.
Yes, clearly your proposal threatened the fungibility of Bitcoin, an essential property
of currency... So it was rejected for very good reason.