Crypto is treated as property by many governments. Hence, transaction can either be a taxable event or need to be recorded for calculation of taxes on some other transaction. That makes using crypto as a currency extraordinarily difficult. One has to track everything. That's what a global FIFO across all accounts and wallets means. The coins the longest in possession are sold first and capital gains or some cases earned income tax is paid on the profit (or a deductible loss is generated). This is a terrible burden for a currency. That obligation to track everything globally also destroys the fungibility of crypto.

An individual may choose to ignore such regulations and it might work as long as one does not become a customer of any vendor that does KYC like a car dealership or something like that. But no business can ever accept cryptocurrency without having to deal with the complexities of what is essentially barter.

Legal tender laws are precisely what fiat money derives its value from. It is so much easier to deal with a currency that not only every debtor has to accept as repayment of debt but that is also the official unit of account and the sole currency in which taxes and fines are paid. Using legal tender is overwhelmingly the path of least resistance.

Crypto being classified and treated by property is also what protects it from being banned by governments. By treating it as property they make using it onerous but also reduce the threat it poses to the monetary authority of the state to nothing.