what if they just tax the shit out of it? 

 Can't tax it if they don't know of it's existence 

 This is true. But I do find the gold confiscation chapter in The Mandibles instructive. With a monopoly on violence they can send goons to your door and drag you away on a whim. The number of Bitcoiners who are truly KYC-free across the spectrum (as in no record of any interaction with the network, ever) is vanishingly small. Best outcome is if you never have to test your boating accident story. 

 In a tub filled with water?