Cash can and is used to buy/sell on the black market and also to buy/sell privately without leaving traces. But it is very difficult to move large amounts of money with cash. It means, it provides privacy with an acceptable level of freedom to do illegal stuff.
Privacy in crypto enables the same but it also allows bad actors to move extreme large amounts of money. The risks for the government are here so big, they cannot accept it.
Well they sanctioned the use of that software.
I don't really see why this is seen as such a problem. Banks that are used primarily for criminal activity get sanctioned frequently.
It's pretty clear judging by the amount of money going though Tornado cash and the amount that was from publicly known hacks known to be flowing through it that the majority of the money was from illegal activity.
> Imagine if they sanctioned Tor Browser or Signal, both of which are used for privacy and can be used for illegal activity.
But they didn't.
But forums that are focused on illegal activities get shutdown all the time.