It seems to me that Bitcoin Circular Economies (BCE) are not guaranteed to be circular.
Let me just tell you that Bitcoin as decentralized digital currency potentially invented for global alternative means of payments and a hedge storage for values is liable to be effective anywhere in the world and that is a guarantee.The circulatory of Bitcoin and its contributes to the economy is based on adoptors and specially the government eligibility to adopt the system too by which generation of taxes can also serve as public revenue and so also, individual adoptors can as well personally benefit from it but if the governments trends to play blind on this Bitcoin potentials by declining from its legal tenders, then there comes a hindrance for the potentials of Bitcoin to contribute circularly to contribute to a certain governments economy.
So obviously Bitcoin is circulated already but depends on the government to permit it legal or an illegal tender in other to spread its wider wings.
I see nothing to technically prevent Bitcoin flight. For example if the majority of vendors switch their Bitcoin to fiat currency. If their is rumor of Bitcoin leaping in value or rumor of government banning/taxing it, every holder might be tempted to switch to fiat. The BCE would then collapse, at least temporarily.
Literally the liquidity of Bitcoin can be influenced by rumours which either scares or attracts more adoptors to accept Bitcoin so likely, when the government decides on banning Bitcoin, it yields negative effect because lot of investors would not want to loose their funds as they would sell them and keep holding on the fiats but though, enthusiasts who basically depends their earnings on Bitcoin might decide to relocate most especially the miners or even investors and enthusiasts who are much comfortable on accepting Bitcoin for means of payments can as well keep holding on the decentralized exchanges which is out of bound to the governments control and then keep on their Bitcoin transaction on the decentralized P2P without the need of exchange to fiats at the centralized exchange.This means it is an alternative for enthusiasts to keep holding their assets and funds on Bitcoin transactions in anonymous.
So the action would only reduce number of adoption but can not afford to have Bitcoin on total blackout in their respective zones.
Given almost all phones now have GPS. in theory one could have a wallet app that only worked within the boundary of the BCE. Users could of course transfer their Bitcoin to another wallet but the small administrative burden of doing that might cause them not to transfer out.
Of course yes, if the government has taken it so far using the GPS or internet internet protocol to track victims after placing restrictions on Bitcoin accessibility, individually you can always alternative or switch your device GPS to a foreign IP to provide you the access to your wallet even while in the zone that Bitcoin accessibility is being restricted.