"The Diamond Age: Or, A Young Lady's Illustrated Primer, in which digital cryptocurrency was mentioned as a driving force that eliminated the nation state by destroying their ability to collect taxes from citizens."
Two thousand years ago governments collected taxes like this...
They went around and depending on how rich you were, they just told you it was tax time and to give them money. If you were poor, you gave them something else like food (farmer). If you built something and lacked money, you might build things for the government.
If all the rich have their money in bitcoins, they'd be like, "Give me some of your valuable paintings, jewelry, etc." though you could also just pay them bitcoins instead but they'd take something.
And actually this would be a better form of taxation. No tax loopholes or anything. The government just surveys your place, sees you have a lot, and they take it.
Oh and as for hiding stuff, they were always going around thinking the rich and sometimes the poor were hiding things. In movies about 1500+ years ago, they governments sent armies around to find people's hidden assets.
But yeah as I said, the governments can always tax people. And if they tax based on wealth instead of all these loopholes, then it distributes wealth better... well... except that the wealthy influence government too much.