Crypto is offshore finance for the little guy.
Since BTC, ETH, etc. are public ledgers, you're basically already giving every government agency in the world the ability to track your balances and transactions without any additional regulation or infrastructure required. Of course, if you're super careful, they might not know it's you yet, but if they really want to, they can find out and make sure you don't sleep very well at night while they wait.
Furthermore, in the latter scenario, that cash is eventually going to get deposited back into a regulated institution (to pay credit card bills, etc.). If anything, a person depositing thousands of dollars in cash on a regular basis is going to draw more scrutiny, especially if they're not running a cash business.
Which leads to the obvious solution: you're going to buy that Wendy's where you're exchanging your USBs for cash. Congratulations. You're now officially a money launderer!