It's possible to create blockchains where all of the transactions are undiscoverable by third parties (unless disclosed). Not sure if there are any completely working in practice yet.
Bottom line, unless everyone in a community agrees to accept currency X, the external government can shut currency X down by not allowing it to be exchanged for the main one.
Bottom line is it doesn't matter what a government wants to accept, except for transactions to they are a party. By your logic no one could use money to buy drugs because the government can always just "shut them down."
That's different. Governments put pressure in exchanges. Mixing services are blacklisted first. Then you can track all the money again and thus no more laundering is possible. Look at China! They cracked down on Macau caisnos for money laundering so now all they need is to crack down on bitcoin mixing.
Just today i exchanged bitcoin for litecoin on a website called shapeshift.io that anonymously matches up buyers and sellers, through a vpn, and the service doesn't even require a login. I can just as easily exchange back with a different seller at some point in the future. Explain to me exactly how you think you're going to curtail that?
