Cryptocurrency can adapt & wallets can be frozen in some instances. Point being, something can be done. Governments can pick and choose their cryptocurrency once Swift is replaced by Japan.
Fiat money can't & will always be used for terrorism.
There is no way to reliably freeze BTC wallets as far as I'm aware. At best you could convince certain exchanges or miners to blacklist them, but even one that allows a trade or transaction to go through should be enough to swap to a different currency and lose anyone following the trail. Curious if there's another way that I don't know about.
So something can be done, if the terrorists happen to be using a crypto with that functionality included. So basically, nothing can be done if they just use a different network? Or even just the most popular network.
Fiat money can't & will always be used for terrorism.