They definitely CAN regulate crypto, I think what you mean is that the regulation will be ineffective for those who care to get around it, which I would argue is the case for a lot of existing regulation (such as drugs, like you pointed out).
Regulation just means telling companies what they can and cannot do when it comes to cryptocurrencies. Specifically, it will most likely be telling any exchanges that operate in the US that they cannot list a large number of the tokens they are currently listing, and then that will tell other US institutions what cryptocurrencies the government says that it's ok for them to invest in.
Regulation is much more of a corporate thing than an individual thing.
Right exactly, so from my point of view cryptocurrency isn't being regulated at all in this exact scenario. It's just more corporate and banking regulations. Without a corporation or a bank in play the stated regulation becomes impossible. We will see this play out first hand when DAO's start doing all manner of illegal things (mostly IP theft) but they can't be regulated or stopped.