Criminal activities like money laundering through Bitcoin blockchain and Bitcoin transactions are one of reasons but governments have bigger reasons which they don't publicly admit to their citizens.

As governments, they want to control their countries and citizens, they want money from tax to help their governmental operations lively. They want tax, at the end of all reasons, money is vital for governments.

I am sure they do recognize fact that citizens can hide a lot of their money through Bitcoin blockchain and altcoin blockchains too. It causes massive loss for governments in tax money flows and they will do more things to bang this market, just to eventually regain more tax money like before.

The government failed to eliminate cybercrimes from their fiat system. The most corrupt money in life are their fiat. The use of the fiat was unable to eliminate money laundering, terrorism financing and other cyber crimes. All these have been existing before bitcoin was created.

Whatever the government says, you will see many people that will follow it. Even if the banks start providing people crypto products and services today, you will see people buying bitcoin in banks and let the banks be in custody of their coins. That is life. It is a natural process because many people do not understand about privacy.

Bitcoin gives people the ability to have full control and gives privacy, but the government will not want those. The government are also going after mixers and no-KYC exchanges. But people that want privacy avoid some of these government policies because with the policies, there are still fiat scam.

The bitcoin blockchain is available to the public, what if people will let the government know about their wallet but any of the government officials can be a bad actor underneath without people known but giving the criminals information needed to steal from people, even with physical attack.

We are aiming for adoption all around the world but is there a way to somehow not sacrifice our privacy in the process? Bitcoin is decentralized by nature and we don’t want to lose its essence.

I should have known that any government would not allow bitcoin to be fully decentralized and would still want to have some sense of control over their citizens and bitcoin.

I am never going to register my wallet with my government if this ever became a thing, though i know it will never be. Since you propose that it is going to be optional, what is going to happen to the people who do not, they will the ones under tight government surveillance and their coins will probably be confiscated if it hits a centralized exchange, for failing to register.

This will do nothing, but open up more options for the government to attack BTC's fungibility.

I disagree.

It’s not money that is corrupt and toxic but rather it’s the people who use it. The government thinks that bitcoin or cryptocurrencies are just another way to exploit money so they are trying to get rid of it or… maybe they do not want the idea of bitcoin being more preferred than their precious fiats. They know that they have no control nor authority over bitcoin so they will do everything to get rid of it and the people who use it.

A lot of interesting replies and opinions here.

Firstly, I don't value Bitcoin in fiat, but in its purchasing power. I may need to relate that to a fiat currency, but that is really just to acquire it through an exchange. Even when you do value it in fiat, then it is international, so it is not just one fiat currency that is being used. Interestingly, its purchasing ability may vary from country to country - hence the opportunities for arbitrage via local exchanges.
What I am suggesting is that people who are not trying to evade taxes, or indulge in activities that some may consider undesirable, may not have privacy as the primary attribute of Bitcoin. If you use an exchange with KYC, then you are a long way closer to my suggestion. One might even say that you have already embraced it.
Would it really make you less secure if the database was hacked? Would it really leave you vulnerable to a £50 wrench attack ( price adjusted for inflation )? At least it make make any perpetrators easier to discover.
Remember that Bitcoin is pseudonymous , so most of the info is easy to  discover anyway. If you really want to indulge in illegal activities, use the currencies of the elite. These are high value gold coins such as the English Britannia and the Sovereign ( the coin, not the woke prince). They are exempt from VAT, gains tax and inheritance tax in the UK, so you can work out how keen the government really is to stop fraud and money laundering.
I just feel that registering your wallet with the government doesn't really give anything away, and may lead to simplification of the use of Bitcoin. Of course you may elect to have an undeclared second wallet, and that would be your choice

The Blockchain network is built on privacy and financial freedom as the government does not have the power to intrude the privacy of any bitcoiner.Once bitcoin loses its privacy policy to any central controlling authority the manipulation and financial crime will increase in the Blockchain world.The privacy of every bitcoiner shouldn't be linked to any central controlling authority like government and banks, otherwise the person doesn't understand the state of being financial free from third parties.The security of Blockchain network lies on your hand as your seed phrase & password to your wallet should be known by you and not shared to anyone nor the government.

Registering wallet with the government is not a good idea, especially since there is usually a change of people in government when their tenure are over. Other reasons are:
1. The government will become a third party to your wallet, in which a corrupt official can give info to fraudsters and empty one's wallet.
2. The government may impose ridiculous tax on bitcoin traders.
3. There will be no privacy to your wallet since the government is involved.

Crimes?
It gives people control over their funds it doesn't really free you since you're still bound in the same economic ecosystem, if we don't bring returns and profit in the equation if just half freedom, since well, everything is still working in fiat.


It's not a new idea and it has already being put in practice in SK, there you can withdraw from exchanges only to a wallet that is owned by another licensed service and you have to prove you have been KYCed for it, so a closed system.
So in your scenario rather than blacklisting you have whitelisting, only approved addresses are accepted, pretty doable but it will be terrible for bitcoin, it might gain legitimacy but it will also strat to lose its main purpose.



They can start that slowly
- exchanges ask you for your addresses D/W and you sign a message with them and they are stored along with your data
- payment processors do the same, again logging and whitelisting addresses
- then they come with restrictions, you can only pay from a white-label address and miners in those countries that enforce this are also forced to mine only transactions from these known addresses
- they might even set up a blockexplorer with those whitelisted addresses
Slowly but surely cracks in anonymity will start to appear since more and more of the addresses and links between them will be known, and people will become worried about sending money to an address that identifies as suspicious, and slowly from freedom you go full dystopian madness.

I'm not saying it will be done but if you elect in enough countries stupid leaders they could try to do it and while not completely able to monitor everything they will do a lot of damage.