On the other hand, it's a world-readable leger. It would be easy enough for the government to permanently blacklist any downstream transactions from such coins as "proceeds of terrorism", and impose strict liability prison sentences on any regulated person (or exchange) found in posession of them...
The FBI and private companies have tools to track Bitcoin transactions. The FBI brags about the capability often. I'm sure that in most cases it is hard to follow up on because the malicious actors are in other countries.
They can certainly legislate about that, and I suspect they will, but there are issues. The ledger doesn't have a concept of a specific unit of currency that changes hands. It has transactions, which have one or more inputs and outputs. Lets say Alice has 3 blacklisted bitcoins and Bob has 2 whitelisted coins. They both sign a transaction which takes all 5 of their coins as inputs, and gives 2 coins as an output to Carol and 2 coins as an output to Dan. The remaining coin is left as an implicit miner's fee. Who got Alice's 3 blacklisted coins? You can make up an arbitrary rule dictating who got which coin in a legal sense (based on order of inputs and outputs or something meaningless like that), or say that any coins output from a transaction with any blacklisted coins are themselves blacklisted, but you can't actually track individual coins. Applying such rules to Monero would make even less sense, as the coins essentially go through a mixer during each transaction. Back to Bitcoin, it's also not clear what it means to possess a coin. We can make fairly arbitrary (though Turing incomplete) scripts for the validation of ownership, a signature is just the most common. Next-most common is probably the m-of-n signature; if I possess 1 of 2 signatures that can spend a coins from an output, do I own those coins? What if I have 1 of 3 signatures, and at least 2 are needed to spend the coins? What if the coin is only spendable by solving a non-cryptographic math problem? If I know the answer to the math problem, do I own the coin? If I make a transaction with blacklisted funds that has outputs spendable by anybody who solves the script by putting in the answer to the problem 2+2, does everybody aware of that transaction now jointly own the coin? I'm not saying you can't legislate about this, I'm just saying it gets silly. Also, I doubt there is a single legislator in your entire government who understands the properties of a Bitcoin transaction that I just described. I bet that their first attempt at regulation will be totally ignorant of what it is that they're actually regulating, and it will be hilarious.
