Now, when I asked why would government go after "normal exchanges" I'm talking about the exchanges which follow all the laws, rules, guidelines, social norms, and which adjust to meet the current public sentiment of the nation they operate in. If you're doing things right and running the business right then the exchange will be as regulated as any other financial institution and will become part of the local/national banking system.

If it's a club then the regulated exchanges are part of the traditional finance club. In order to access the traditional fiat there has to be these regulated exchanges. Otherwise you cannot expect high net worth individuals to ever get involved with crypto if they have to use some shady decentralized exchange which could be run by North Korea.