I don't get it: Bitcoin and privacy are by definition orthoginally separated. Bitcoin transactions are not anonymous, they're public and can be traced quickly and easily. You're one public key leak away from having your entire banking history leak to the public. You can work around this problem by having different wallets for every transaction, but getting the coins in there would be a huge hassle if you have to buy them physically, with cash, every time you want to pay.

Bitcoin is uncontrollable by the government but that doesn't mean the government isn't following your every step on the blockchain. They'll let you play with your internet coins as long as you behave but if they've got it out for you, either because you're a criminal or because they're oppressive, you can't rely on the blockchain to protect you. Physical money in your wallet is far more private than any other common form of blockchain currency (which is why many countries are trying to limit how much physical cash you can have on you).