Of course, X can send Y cryptocurrency, and Y will receive it.
The problem is that for the vast majority of people, the only way for X to acquire the cryptocurrency is to sign up for an exchange. And for Y to actually use it, they will have to convert to fiat via an exchange. And when signing up, X and Y will have to reveal complete financial details about themselves - home address, bank account details, identification document scans, etc.
This means that governments across the world now exercise significant control over who you transact with. And how much tax you pay for your crypto activities. If governments don't like you, they will force the exchange to kick you out. Or they will block all your bank accounts - like my own country often does - almost completely destroying your life.
This is a far cry from the early dreams of cryptocurrency, where people thought that governments would have close to zero control over their transactions. Yes, right now, crypto is a bit more free than other types of transfers, particularly for international transactions, but the noose tightens every year.
It doesn't matter what the technical details of the protocol are, what matters is what you can do in practice.
A government prohibiting crypto and/or making it impractical to access isn't evidence of the technology's failure.
To make an analogy, see the laws and prohibitions around encryption. Many countries (USA, France, etc) have had severe restrictions on cryptography over the years; some countries like China still do have these in place, and others like UK are considering new laws that further impede access to encryption. Yet none of these policies are strong evidence of some failure of encryption technology and the ideas it has brought forth.
France, 1999:
> France to end severe encryption restrictions [...] Until 1996 anyone wishing to encrypt any document had to first receive an official sanction or risk fines from F6000 to F500,000 ($1000 to $89,300) and a 2-6 month jail term. Right now, apart from a handful of exemptions, any unauthorised use of encryption software is illegal. Encryption software can be used by anyone, but only if it's very easy to break.
Indeed, cryptography for information transfer has been a successful technology. This is due to the work of many activists leveraging the prior existence of the fundamental rights related to communicating freely in the constitutions of many countries. Despite this, as you say, governments have tried to make laws around this, which are partly successful. But there is a crucial difference between cryptography for communication and cryptocurrencies.
You have to provide an account of your financial activities at the end of the year to your government, and lying on it will get you in serious hot water. You don't have to annually tell the government who you communicated with and how. So, you using encryption technology will never land you in trouble, unless the government catches you. For instance, millions pirate copyright material around the world, but governments find it very difficult to catch the ones setting up the sharing sites.
But any non-trivial usage of cryptocurrency has to be reported by you to the government, and if you don't the tax authorities will come after you. So the government at this point has close to complete control over which cryptocurrency transactions you can freely engage in, and which ones you can't.
States have been actively shutting down p2p fiat to crypto trades, but they cannot shut down all of them. Currently if you don’t have an exchange account, the most popular platform is Bisq for secure p2p fiat/crypto trades. And if you’re more oldschool there’s always localmonero or irc.
The problem is that for the vast majority of people, the only way for X to acquire the cryptocurrency is to sign up for an exchange. And for Y to actually use it, they will have to convert to fiat via an exchange. And when signing up, X and Y will have to reveal complete financial details about themselves - home address, bank account details, identification document scans, etc.
This means that governments across the world now exercise significant control over who you transact with. And how much tax you pay for your crypto activities. If governments don't like you, they will force the exchange to kick you out. Or they will block all your bank accounts - like my own country often does - almost completely destroying your life.
This is a far cry from the early dreams of cryptocurrency, where people thought that governments would have close to zero control over their transactions. Yes, right now, crypto is a bit more free than other types of transfers, particularly for international transactions, but the noose tightens every year.
It doesn't matter what the technical details of the protocol are, what matters is what you can do in practice.