In this case the government could mandate that every address be KYCed. Then they give out some addresses with either fake KYC stubs or don’t KYC them at all.

In this case the government could mandate that every address be KYCed. Then they give out some addresses with either fake KYC stubs or don’t KYC them at all. This wouldn’t be done at the protocol level, in the same way one can get around TLS via MITM without sabotaging the encryption algorithms.