The technology is hard to regulate, but the exchanges where the overwhelming majority of fiat-crypto trades happen are regular old businesses which can be regulated or sanctioned just like anything else. Blockchain magic wouldn't stop the feds from seizing Coinbase's assets and hauling Brian Armstrong off to prison if they wanted to.
Yes, the fiat input and output are the only points that can be controlled, but even then they can only be controlled by the local governments. And as you can see all of them are late to the party.
