You cannot stop people to do illegal things and i guess bitcoin is just an isolated case. Any form of payment will do including cash, online payments or even in kind. Its such that, bitcoin has all the aspects to keep the identities of the person who is paying thats why its perfect for this.
I like your point of mate, as I have tried to analyze what is the thing in Bitcoin that needs to be regulated is the identification. If you check all the bitcoin criminals, they only had one thing in common. They took advantage of bitcoin for letting them become anonymous and make transactions.
KYC is something to think about and would actually help bitcoin to have a decreasing number of criminals. But definitely, after all the regulations everything will do, there are always criminals who will find a way to their stupid things and we will not be able to control it.