Most of our lived-in systems have very little in the way of guardrails or oversight. We maintain our safety and happiness through a social contract, not absolute enforceability of law.

The "exploits" you're describing were possible 20 years ago through various other methods (unregulated banking, cash in briefcases, etc). The new thing is government and police having a much greater degree of control over monetary systems.

I think crypto is failing at most of its promises and it's still unclear whether it will ever live up to any of them. But rah-rah celebration of government being able to monitor and halt anything it wants to is not the way to go, either; it's actually a literal doomsday scenario (Vernor Vinge has written about this, among others).

How would Bitcoin work for a sanctioned authoritarian regime like north Korea? Who would they trade it with for useful currency or goods? It's not like they can just create a Coinbase account and cash in the Bitcoin for USD.

Perhaps not, but they can sell their crypto reserves to other actors who are in a position to exchange them, for stuff that's actually useful to them.