if you make it illegal to convert btc to cash (which a government can do trivially), my contention is that this will kill crypto. Most people simply don't want to break the law. Much of the liquidity in the system dries up. Yes you can break the law if you want, but that just goes to show that crypto's number one real world use case is to skirt regulations.
Regulations are not always a force of good to be observed all the time, particularly in non-democratic countries.