Or maybe you only meant a single benevolent government to have this power? In that case I propose the Polish government to censor world transactions (simply because I am a Pole and a patriot). I trust you don't mind!
We can call it: "exactly what we do right now"
The only reason the US is able to sanction other countries is the scale of their economy. They influenced Europe to cut trading relationships with Iran, not through the US dollar, but through exerting political influence. The Europeans would rather trade with America than Iran, and America said they got to pick only one, so they complied.
None of that changes under Bitcoin or any other currency, crypto or otherwise, in no small part because reporting requirements don't go away. Laws don't go away. Political influence doesn't go away. International relations don't go away.
Do you really think that with cryptocurrency America would be unable to materially sanction Iran? Are you sure? The US Army is a pretty good army.
It's just that individuals within the countries wouldn't care much because Bitcoin or Monero transactions always go through and are never reversed.
The government already has total control over the domestic economy, and can coerce you through violence. What have you gained other than a dramatically less energy efficient economy?