This. Taking away everyone's privacy because somebody might use privacy to break the law is dumb. You want to bust drug dealers? Bust them for selling drugs.
- We have driver's licenses, passports and all manner of ID's
- The IRS can audit banking records to ensure there's no tax fraud, sans warrant.
- You can be filmed and photographed in public places for security purposes
The list goes on, and the argument will be that new technologies require new compromises. Yours is hardly a constructive (or even correct) approach to the problem, because it (a) dismisses valid concerns and (b) implies a warped interpretation of privacy law. There is no absolute right to privacy; there cannot be!
That said, we're largely in agreement -- restricting privacy is probably the wrong approach in this particular case, but I think the counter argument should instead be made as I previously described, rather than by a knee-jerk opposition to restricted privacy.
Cash transactions carry substantial risk: both parties must be physically present in some place to make the deal. They can be tailed, the meeting place can be under surveillance, they can be raided, they can murder each other and run, etc. It's also impractical to deal with large amounts of cash due to the risk of robbery/theft (including civil forfeiture), and legitimate entities won't take suitcases full of cash for large purchases. Infiltrating and exfiltrating large amounts of money from the legitimate banking system is also very likely to leave traces that can be understood by sufficiently skilled/motivated forensic accountants.
Whereas flipping some bytes in the firehose of cryptographically secure bytes already coming in and out of every home is undetectable and basically risk-free.
Some much more concrete human rights are ensured through taxation: food, shelter, water, health care, police, education, national defense, etc. If you make taxation effectively optional by running a perfect, free money-laundering system, some of them may have to go.
Doing a significant volume of cash transactions with any financial institution also causes it to send a Suspicious Activity Report  to the federal government, which greatly increases your chance of being selected for an audit.
It's true that you don't need records to explain your personal spending, but you will need to produce records justifying any deductions/benefits claimed, and if your lifestyle appears to be large for your reported taxable income, you'll need to account for that too. Recently the IRS has started using public social media posts indicating lavish spending against people who are only paying taxes on meagre incomes.
Laundromats are actually classic tax fraud vehicles. There was an article on HN recently about how the government will pull their water/electric bills to see if the volume of business they claim their doing is in line with their actual resource usage.