Drugs are addictive which is why people continue to use them even when illegal. Why would people use illegal crypto? It was hard enough to use them as a currency when legal, them being illegal would make them mostly worthless to most people.

The whole point for criminals is that it allows pseudonymous (or anonymous, in the case of monero), and remote dealing of illegal goods and services. Especially across international borders.

Another use is tax evasion and money laundering.

Why is crypto any better than cash if users are forced to deal in person? I understand the argument of not having to carry around a duffel bag that could be seized. But nations can disrupt crypto markets on a global scale.

At the very least, they can make it difficult to exchange for actual, usable, local currency. Which appears to be what China is poised to do.

For them, that would be back to square one in terms of money laundering.

Odds are that, given fiat to launder, or crypto that needs to be converted to fiat that still needs to be laundered, they would cut the useless step.

The only illegal industry that would still see the use for it is maybe ransomware, but ransomware is not a cyclic business, so it would be surprising that they'd find enough individuals on the street to convert their millions easily.