"The Bitcoin protocol allows two parties to transact without any outside interference"
...other than the entire Bitcoin network, right? When last I checked the design of Bitcoin called for transactions to be checked by other Bitcoin users and then broadcast to the entire network. That is about as far as one can get from a two party transaction.
If you want real two party transactions, you probably want this sort of thing:
the network doesn't interfere, they do nothing to the transactions. They are there to act as a safe-guard against double spending, among others, by "validating" them.
It introduces a mandatory third party (the government) to transactions where only two parties are intended.
Such a virtual currency could be designed, and I don't believe it would be successful.
The Bitcoin protocol allows two parties to transact without any outside interference. If governments can restrict using a protocol remains to be seen.