I do not think they care about regulating it. What they do not want is for it to become widely adopted. Removing it from all exchanges will effectively prevent mass adoption.
This is why Bitcoin Cash is the better way to go for mass adoption of crypto. It is on all exchanges and you can get close to Monero level privacy with it using CashFusion via ToR.
It also scales much better than Monero as the stress tests (https://monero.town/post/3601453) have shown Monero fails at around 500k TX per day. The nodes just cannot handle it and this is likely an architectural shortcoming with no easy solution. BCH has been tested up to 10 million with no issues and can likely do much more.
Yes, I do agree that once it become popular they will most likely start flagging it. Hopefully by then we will have smart contract level schemes that can break links between coins without detection. I still use Monero but recently have realized it cannot gain world level adoption due to many factors.
Things like this are the future of blockchain privacy
EIP-7503: Zero-knowledge Wormholes for Private Ethereum Transactions
https://research.2077.xyz/eip-7503-zero-knowledge-wormholes-for-private-ethereum-transactions#introduction
and will also be possible on Bitcoin Cash as ETH or any other EVM style chain cannot serve as a world level currency
What is the BCH VELMA Upgrade? (VM Limits 2025) - https://odysee.com/@CashDragon:6/What-is-the-BCH-VELMA-Upgrade:b