If your concern is effective taxation, there are plenty of methods that worked historically while preserving financial privacy like property taxes.
By making non KYC transactions easier, above becomes much easier and crime, fraud, scams and corruption significantly more profitable.
Stablecoins' success is also a reaction to the ever-increasing friction created by overreaching regulation. If you have a supplier in China, and need to buy some in-demand goods, you can sign the contract and send the money now, whereas with the classic banking system, you'd have to wait for two weeks to clear everything. This alone is brilliant and should be welcomed for its usefulness.
Drugs should be legal, so that's not a problem. Terrorism and human trafficking are more complicated topics, but basically I think they should be attacked more directly, not financially.