However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin; estimates are 2-5% illicit transactions globally in fiat currencies, and about 0.34% illicit in bitcoin in 2020 (a rate that's fallen significantly since 2019 as we see more mainstream early adoption if bitcoin [1].
This proposed regulation doesn't address the problems you evoke, and its an attack on fundamental human rights such as privacy.
> However, a far larger portion of illicit drug transactions are for cash dollars than for bitcoin
The regulatory system, and people who are ok with deferring to it in its existing incarnation (i.e. the revolving door between people within TBTF bailouts-every-day with "open" "market" operations banks [where these cash dollars inevitably end up] and the people who "look" after them system), are fine with this because slaps on the wrists and fines are considered the cost of doing business and there can't be anyway possible to live and exchange value without them being involved under the guise of "protection" or "else" racket.
Robin Hanson would probably call this phenomenon a form of "Elite Tax" on society. [0]
This proposed regulation doesn't address the problems you evoke, and its an attack on fundamental human rights such as privacy.
[1] https://www.forbes.com/sites/haileylennon/2021/01/19/the-fal...