That's right, if your UTXO is linked to you (or a profile / behaviour pattern that eventually can be) then you don't own Bitcoin privately - the observer (surveillance state) knows what's yours. And some day when fiat isn't worth the paper it's printed on, they may want their share of your Bitcoin. Even assuming Lightning is private (which is probably quite an assumption) your channel will eventually close, revealing gains. - I think what you're getting at The solution is to make the shift to only(or mostly) spend and receive within in the private layer 1 (Monero). Or it's layer 2. This is the P2P counter-economy, a free stateless market. They can still see what goes in Fiat -> XMR (somewhat mitigated with P2P exchanges) so it's crucial that you're paid in XMR. The is what it actually means to "separate money from state". Earning, spending, and saving without permission. Bitcoin solves the inflation part (kind of) and the other part - the tax part, is easy done then L1 privacy is weak. "Privacy is for L2" is a lie. Unless they mean you won't actually own Bitcoin (liquid, ecash). Many more ideas, tangents, and naunces here, let me know what I got wrong.