The federal government has seized assets of third party companies holding huge asset, they can do it again.
Government can knock your door and ask for the seeds or private keys and there is nothing stopping them from doing it which is not related to self custody or not but the owning bitcoin is what the primary reason why bitcoin is existing, own your money and have full control over it and no one prints more and such are the primary reasons why we need to hold bitcoin and most importantly if you don't own the keys then it is not your coins.