Of course they do not understand it. I think what will happen is that one (or more) of the decentralized exchanges will take off.
No central place, no single point of failure; just people exchanging with each other.
At the moment the problem is such exchanges (like Bisq) are too complicated and too slow for people to use.
Another possibility of what will happen is that there will be "black passenger" countries who couldn't care less about some FATF. And the exchanges will be regulated there.
Same thing is already happening in other areas - e.g. European countries try to impose crazy taxes and then︀ you have places like Luxembourg or Ireland which help companies to avoid them. European countries︁ try to regulate gambling and then you have Malta handing out licences. Some countries have︂ 85% tax on cigarettes so people smuggle them from the neighbouring country where there's no︃ tax.
You cannot control people using Bitcoin... theoretically you can monitor and track the activity.︄ However even then you have decentralized systems and even truly anonymous currencies like Zcash, Monero︅ and others.
