I'm not sure this is true. Censorship resistance is a pretty basic part of Bitcoin, yet gov'ts are busy coming up with ways to circumvent this.

If we all upgrade Bitcoin to some incredibly fungible, ecash-level privacy, that is essentially the same as physical cash, what stops the gov't from requiring all the same things it requires of physical cash? "If you want to send your 100% fungible, private coin to our exchange, you have to prove where you got the money (proof that you earned them, a letter from the source, etc...)."

The issue here, it seems to me, is not the technical abilities of Bitcoin, but rather the fact that the gov't controls most of the points you need to touch in order to do very much with Bitcoin in the physical world.

Privacy improvements to Bitcoin help Bitcoin be better, but they don't fix this problem.