> All that stuff about clean coins, joins and mixers. Money laundering.
The use of a CoinJoin does not imply money laundering. Launderers can and do use these tools. Merely using the tool does not make you a launderer. If you are suspected of laundering, you can prove your money movements to a law enforcement body which offers a warrant to search them. This is how things should be. Innocent until proven guilty.
CoinJoins are necessary to evade warrantless surveillance, because transactions on the blockchain can be linked to your person when the state obtains parts of that information from KYC exchanges. Since you have a right to secure against unreasonable searches, you have a right to thwart these efforts to illegally monitor your financial activity.
> Who are doing so because they expect the price in fiat to go up, so regulating on/off ramps would likely kill that.
They expect the price to go up because they understand the subjective value of commodities, Gresham's law, and human self-interest. It has nothing to do with regulation. Bitcoin will grow with or without state involvement because it solves real problems that governments and others have created. More people are becoming aware of this, and Bitcoin has propelled some of the issues into the spotlight. The role of the state could slow down or accelerate Bitcoin adoption, but it cannot stop the inevitable - particularly when their own policy of infinite inflation is the major driver of Bitcoin adoption.
As said above, a government would be unwise to attempt to push the activity underground, where they can no longer monitor and collect taxes on it. If the regulatory burden on exchanges ends up making it more difficult for me to obtain bitcoin through a KYC exchange than via the black market, then I will end up doing the latter, and by doing the latter, I might then potentially increase my interaction with the black market (reduced sales tax), hide my earnings (less income tax), hide my profits (less capital gains tax), hide my wealth (bye bye inheritance tax). Isn't going well for the government, who will see a reduced tax income.
The government just wants people to pay taxes. It shouldn't really care much about whether people are using dollars or bitcoin - only that Bitcoin can potentially make it easier for people to dodge tax. The best option for a government is to make it easier to use bitcoin for legitimate services than the black market so as to discourage black market involvement.
A government should be working on ways for it to utilize Bitcoin for the purpose of tax collection, and then encourage its widespread use in retail and in PAYE, such that it can have an almost live view of the economy and can see who is paying their taxes. Any delays in mobilizing such systems will ensure that superior, more privacy preserving systems will instead be adopted, and will give limited benefits to the government.