To your point, this is the reason for a No KYC stash. Do not allow your government free reign. There always has and will be grey / black markets, and at times utilizing them can be the difference between surviving and not.
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No KYC helps but does not solve it. Your government doesn't need KYC to figure out you have illegal (in their definition) bitcoin and put you in jail.
You have to play politics. Signing off from politics just because you have non-KYC bitcoin is a huge mistake.
There is value in increasing the cost of enforcement. Be a bit more slippery than the average shmuck.
On some level, playing politics is the burden of living in a "free" society.
I totally disagree. Thinking you "have to play politics" is what gives the politicians their power.
Opt out and delete the fiat virus from your mind.