> I would just need to send some money around to well-known addresses to "freeze" those wallets, too.
Easily solved by sending illicitly obtained bitcoins to the government—which they can trivially ask you to do, or automate on the exchange that you're on.
Note: people can already deposit illicit funds into your regular bank account without your permission, and it causes no difficulties.
> They would need to control the private keys in order to actually perform that confiscation.
They're not confiscating them except from private citizens complying with the law, they're freezing those wallets and the bitcoins they contain out of the legal bitcoin system entirely. The government has no need to confiscate bitcoins when it can prevent their legal use without confiscation.
> Easily solved by sending illicitly obtained bitcoins to the government—which they can trivially ask you to do, or automate on the exchange that you're on.
Which means I can easily launder my own money by claiming that "someone" sent frozen cryptocurrency to me "maliciously".
> The government has no need to confiscate bitcoins when it can prevent their legal use without confiscation.
The government has no more ability to prevent use of Bitcoins than it does to prevent use of cash or gold. Again, making something illegal doesn't prevent it from happening anyway.
Easily solved by sending illicitly obtained bitcoins to the government—which they can trivially ask you to do, or automate on the exchange that you're on.
Note: people can already deposit illicit funds into your regular bank account without your permission, and it causes no difficulties.
> They would need to control the private keys in order to actually perform that confiscation.
They're not confiscating them except from private citizens complying with the law, they're freezing those wallets and the bitcoins they contain out of the legal bitcoin system entirely. The government has no need to confiscate bitcoins when it can prevent their legal use without confiscation.