But government laws and regulations still have precedence over smart contracts or blockchain transactions. “But it’s written in the smart contract” is not a valid excuse for breaking the law of the country you reside in, and will be thrown out in any court. So instead of replacing one governance system with another, you’ve create a second, subservient system that is overruled by the first, have you not?

That’s the part I’ve never understood. Sure, you could use a blockchain that is anonymous to try and avoid scrutiny and legal trouble, but at that point you’re basically just a criminal.