This question presumes the envisioned future is where each person has their own non-custodial wallet that holds stablecoins that they use in transactions, no?

If the current trajectory is any indication, it's more likely that everyday users would mostly hold custodial accounts at organizations (e.g. Coinbase, like banks) and use stablecoins that way, which control aggregate wallets, and trackability stays within the org level (also like banks). Probably not as easy for the public to access (possible in data hacks) but just as easy for government access.