Cryptocurrencies don't make any sense unless they're decentralized and not controlled by governments. That's where the value is. Bitcoin has value because it cannot be controlled, printed (inflated) or easily confiscated. It gives financial sovereignty and freedom.
But, it's not for everyone. You obviously believe that governments need to control finances. That's fine. I think most people don't want freedom. But there's certainly SOME percentage of the population that really want and value freedom. That's why Bitcoin has and will continue to have value.
There's a meme that hashing power is equal to control, but the truth is that having a hashrate majority gives you a pretty limited set of powers, and if you abuse them you will see people flee to other cryptocurrencies or systems.
> don't make any sense unless they're decentralized
Things that make sense decentralised to service freedom have a track record of becoming centralised to service convenience. Source: The Master Switch by Tim Wu.
Devil’s advocate: Financial freedom requires freedom from forceful confiscation. Thus, without a military backing of some sort, perhaps by the sovereign nation state the crypto’s owner resides in, cryptocurrencies will always be vulnerable to real-world regulations and bans.
Forceful confiscation is pricey if you don't know whom to confiscate it from and how. A person may not have bitcoins. Or he might have it stored securely in another country to which he doesn't have immediate access. Those who have a lot already prepared themselves accordingly. And confiscating a little from many people is really pricey.
Confiscation is, as you've identified, fruitless. Only governments without level-headed leaders will try.
Global regulation remains a risk for cryptocoins. If the only remaining utility is the black/grey market, cryptocoins become much less valuable and will end up losing a lot of interest.
I agree that confiscation requires knowledge on who the owners are and rough amounts they own. With that knowledge, physical threats to demand exchanging cryptos for safety or freedom could be used quite efficiently depending on the laws and customs of each country.
The fact that the assets may not be easily traceable make them a more lucrative target for criminals to use unlawful threats against innocent owners as well.
But, it's not for everyone. You obviously believe that governments need to control finances. That's fine. I think most people don't want freedom. But there's certainly SOME percentage of the population that really want and value freedom. That's why Bitcoin has and will continue to have value.