If you're a regulator, having all of the transactions on the interface between institutions and individuals pinned to PII, following money around the public ledger becomes significantly easier.

If you're, say, a drug dealer only taking bitcoin, the police just have to buy some of your drugs and watch where the money goes to have a pretty good idea of all of your clients, your entire business history, and the names and addresses of your customers. It is perhaps sometimes technically possible to have good OpSec and launder the crypto so it can't be traced, but this is really hard and not making big mistakes is as well (and people breaking laws are often pretty stupid about it).

Unless you are very competent and very paranoid, the advertised benefits of crypto are very hard to achieve.