I can certainly see a case for this kind of thing but for it to really hit the market you need to lull people into a false sense of we won't touch your Bitcoin, here have an ETF, here we telling you its a commodity, here we have KYC on-ramps, here borrow against your bitcoin with institutions, here do multi-sig wallets with companies and then you could account for how much BTC you could reach easily lets say for argument's sake its 2 million
  • Now you can crack down on those easy targets
  • Then you go for everyone who bought a hardware wallet
  • Then you check IPs of nodes that were on clearnet
  • Go after mining pools in that country
and you gobble up all that Bitcoin,
  • Then you could appeal to the normies and say we give you X exchange rate and we won't punish you and see how many that bleeds out
Then all that's left is countries that don't enforce it, and private P2P Bitcoin, coinjoin Bitcoin and miners who form new pools outside these countries and while it would surly hurt short term, and for the individuals affected the network and Bitcoin economy can still run on the remaining float in circulation