Close down a centralised exchange ... and they'll start using a decentralised exchange. Track their cryptocurrency movements ... and they'll start using cryptocurrencies that offer greater privacy and anonymity.
In Soviet Union, violation of currency control rules was punished with three to eight years imprisonment (and in certain cases, like if you doing it in a group, that becomes fifteen years to death penalty I believe). Introduced in 1960, this article was adjusted to be less severe in 1990, and finally deleted in 1994 (didn't make it into 21st century, but by a small margin). And this was classified as offence against the government, which has an interesting side effect: if you know about someone owning non-permitted foreign currency, and did not report it, you are considered guilty and punishment
for not reporting is one to three years imprisonment.
You may argue that it is difficult if not impossible to prove that someone owns a bitcoin, and a customary good method of dealing with that is "if two people make a sworn statement that you do, then you do", with bad method being to accuse based on a single anonymous report. Which we here have much experience of.
This will work against bitcoin much better than against drugs, because a typical junkie has much less to lose than a typical bitcoin owner. The incentive to report a bitcoin owner is arguably larger than the incentive to report a junkie.
So in summary, in some part of the world, government allows people to play their games as long as it is not troublesome. Once it becomes troublesome, the entire industry will be gone in half a year. That part of the world certainly includes Russia and some former USSR states, arguably includes China, and I don't know about Muslim states. The obvious alternative is that the government will subvert either cryptocurrencies or the entire blockchain model for its own purposes, which is also entirely possible.
Bitcoin will not work against government regulations based on technicalities alone. If people want it enough to resist the government regulation enough, then it will fly. So far, I don't see it, at least not here.
The even bigger picture, in my mind, is that we're one planet, one species and that it's time to start behaving that way and working together if we are to survive and continue to advance. In the age of the digital global village, segregated nations, ruled by corrupt or self-appointed leaders is little removed from tribalism. I see the breaking down of borders that the internet and cryptocurrencies bring as the beginning of something spectacular.
On a bigger side, do people actually want a borderless world? Some do, but is it a majority? Certainly I do not want breaking down of borders, bad as they are. However, I think that's a bit outside of the scope of this discussion.
