You are absolutely right. There is no direct link between bitcoin and the traditional banking or monetary system. To deposit or withdraw bitcoins, people have to use an intermediary, as in the case of cryptocurrency exchanges such as Coinsquare and Coinbase in Canada.
Those players are the ones who require that their clients be identified. According to what I read in the legislation on money laundering and prevention of financing for terrorist activities, the Proceeds of Crime (Money Laundering) and Terrorists Financing Act, that protocol could easily be deployed by those players.
That also goes for some exchanges of currencies on the street, where bitcoins are bought and sold. Above a certain amount—I think the threshold is $3,000—people have to provide a piece of ID. When someone wants to deposit or withdraw bitcoins in Canadian or U.S. dollars, they also have to identify themselves.