I don’t know if a government today could just seize crypto, but the USA did so with gold in the past. Imagine owning a whole bunch of gold, and then waking up one morning & finding out it’d been replaced with US Dollars.

https://en.wikipedia.org/wiki/Executive_Order_6102

A stable coin doesn’t necessarily have to be backed by fiat, DAI is backed by crypto assets and those assets can fluctuate and sometimes need to be increased during volatility.

I think the point of fiat backed stable coins are more for getting around regulations (eg Tether) and a fiat on-ramp for getting into the ecosystem. Certainly if the government seized a large portion of Tethers assets then that could affect other assets, but this actually has already happened with (a small portion, not large) Tether and nothing catastrophic happened.

Hasn't panned out that way for Tether... So far...