Bitcoin flowing to the Blockchain is anonymous, but bitcoin transaction from user to market and vice versa should be transparent and taxation of bitcoin and other cryptocurrency makes a healhty market and could become a widely applicable to the masses and Bitcoin becomes stronger.
They would pretty much have to outlaw peer to peer BTC to Fiat transactions, and only allow accredited exchanges to handle these conversions. This would also require every exchange to conduct complete AML/KYC, even if the user trades under the established daily transaction limit (2-2.5k, varies per exchange).
This will just make folks switch to the truly anon cryptos. The technology is already well beyond the level of regulation.