That's easy to fix: "All citizens are required to report all Bitcoin addresses under their control to government". The result will be no more privacy for law abiding citizens, while criminals don't care.
"If privacy is outlawed, only outlaws will have privacy."-- Philip Zimmermann
When a government passes a law, they need to understand the implications. For every action, there is an equal and opposite reaction. If you're pushing a law, or program, expect something to pop out in the other corner. Outlawing privacy will simply result in more outlaws. And in fact, I'd claim that outlawing privacy will incentivize conscious people to dive deeper into protecting their privacy. (Conscious, because truth-seeking individuals are the greatest threat to the government, and often, need privacy.)
Before strong encryption, people had to place trust on administrators to protect their passwords and private messages. These admins could be threatened to hand over everything to the government. Then, strong encryption became available to the masses, and raised the middle finger. Fast forward to the 21st century, and we have anonymous browsing to the Internet and currencies based on cryptographic proofs.
So, I say, let the bureaus kick the hornet's nest. We can code faster than they can regulate.
