This argument seems strange to me. When you buy something don't you typically revive a physical good? It seems easier police that then the copying of various files. If cyrpto is outlawed you aren't going to use it at Amazon or Walmart. It is also hard to see a commerce org of any size existing with out government permission. This argument seems to assume people will only use cyrpto to buy other cyrptos. That is useless money. Money is used to buy goods and services.

How could you tell whether a physical good was paid with Bitcoin or not? Just purchase from another country.

In general there is no incentive for other governments to follow suit because those which don't institute bans would stand to profit more by taxing their miners.

This may work for smaller shops, but it's easy to catch larger companies doing this. Public ledger and this transaction involves knowing the buyers address. Plus if a large enough website allowed you to pay with Bitcoin they could easily get shut down. The start-up cost for a store are way higher then hosting a hard drive full of copy-righted files, so they couldn't be as elusive.