The only effective way to regulate cryptocurrency is to regulate access to fiat. This is a good example. Do the verifications required for know your client (KYC) and anti-money laundering (AML) and you can get access to fiat. Just like you have to do for any normal bank account.

Here are the words from the Kraken webiste

The required documents for Tier 4 individual accounts include a signed application form and KYC documents

https://support.kraken.com/hc/en-us/articles/201352206-What-are-the-Verification-Tiers-

We had all best get used to it. This is how the big boys protect their industries.