Let’s say that I have taken the utmost precautions, fit only for a computer nerd like myself — definitely not the average person. I’ve used Bitcoin Core on a dedicated, secure computer and created an encrypted wallet.dat, then put that on a series of self-encrypted USB sticks/hard disks, storing them around my house and in my fireproof safe. The decryption phrases are very strong and I haven’t stored them anywhere on paper or on physical metal thingies that can be seized. (It’s all in my head or in a series of text documents on encrypted disks which only I know how to get to.)
What does that help me if the government comes with their cops and beat me up until I decrypt the devices and wallets? Or even “just” lock me up until I do so, without physically hurting me? I was once held hostage by them for only 24 hours, and it felt like 24 years. It was a living nightmare. I would never be able to endure that perpetually, and who knows what they actually do to my devices while I’m in there? They might decide to destroy them if I never tell them how to get to them, thus making them gone for me as well.
Maybe your answer will be that they cannot know about all my copies, if perhaps I have hidden one USB stick inside a wall or dug it down at a specific tree in the woods which only I know about. Sure. That’s a good argument. But still, if they physically beat me up, or otherwise know that I have the coins and just won’t let me go until I give it to them, how am I going to get out of that? You think that BS about having had a “boating accident” works in the real world? Nobody who goes through this kind of trouble would actually lose their coins in some “accident”. They are not stupid.
You don’t need to bring up seed phrases. For one thing, I don’t have any such, but even if I did, I could never memorize all that in my head, and I doubt that almost anyone who claims to have memorized theirs will ever be able to get their coins back when “it all hits the fan”. Also, they probably will have the seed phrase backed up somewhere, such as on a piece of paper or metal thingie. Guess what happens then when the cops come looking through your stuff?
Finally, I would guess that 99% of Bitcoin owners either have their coins on an exchange (thus they have zero ability to prevent direct deposits by the government) or using a hardware wallet, which, if you have one, make it obvious that you own some crypto coins, and all of the above applies even more to that situation.
To me, it all sounds like some kind of fantasy that people keep telling themselves. Please explain how having Bitcoin is any different in practice from having a bunch of gold bars that they can just steal?