How can the government discover I own BTC, let's say I'm from Venezuela where crypto is banned, what they can do to discover and arrest me?
By tracking some bitcoin addresses that are still active in their country it's easy. Because now it's easy to track IPs someone is who used bitcoins. And in the end you will be caught because you also already know that bitcoin is banned in your country.
IPs address can be tracked by government and our bitcoin transaction can be trace. And if government can not identify the owner, government can make regulation to their citizen to report their ownership.
Government have power on our life and if used for illegal activity its very easy for government to track it down