Interesting.
I'm not sure I see it crippling the network, BUT I can see a situation where captured bitcoin starts to trade at significantly reduced value compared with non-captured btc.
I mean it already does (if you've ever bought peer-to-peer you know you will pay a 5-10% premium for the privilege of not handing over your identity) but the differential could be in the hundreds of percents one day if these VASPs (and governments) begin to capture more and more coins within their firewall.