Just me thinking out loud. Self custody KYC Bitcoin is no different than ETF Bitcoin when it comes to 6102 confiscation.  If I were the government protecting the dollar and my monopoly on money printing, I would use the IRS as my first attack vector. I would be trying to separate the millions of normies from their Bitcoin. I know exactly who has KYC Bitcoin, how much they have and what they bought it for. I would make Dec 31 the taxable event day and say it is illegal to self custody or sell bitcoin. Your tax bill is 50% of the capital gains you made on bitcoin, due April 15. Then I really don’t care because I know most normies would have to sell a good chunk of their bitcoin to pay the tax bill. 

If I wanted even more success, I would offer a program for voluntarily giving your bitcoin to the government thru OTC. I would pay out the full market price of bitcoin, say $1 million per coin, plus match your capital gains. So if you bought bitcoin at $100k, your capital gain is $900k. I would pay you 1.9 million, and withhold $900k for taxes, letting you keep the full million market value. This wouldn’t primarily be to reward those who comply, but to create a tax bill for those who do not comply equal to the full capital gains. Because the tax value I would use would not be the $1 million market value, but the $1.9 million I would have paid you if you did comply. I’m going to calculate a $900k tax bill for you and send the IRS and threats of jail if you don’t pay up. So now you have to sell most of your bitcoin to pay the tax bill. Since that was illegal if you did it after Dec 31, you won’t be able to document how you came up with $900k. That allows me to tax that $900k as ordinary income in the next tax year, adding an additional 300k of taxes you owe.