I would expect a government to hold it as seized until they brought in both crypto experts and legal experts to help them determine what to do with it, probably

I would expect a government to hold it as seized until they brought in both crypto experts and legal experts to help them determine what to do with it, probably via the judicial system. When Japan seized BTC from Mt Gox it was years before they converted it to Yen. The same goes for BTC seized by the US government in cases like Silk Road. The Bahamas didn't even convert it to the Bahamian dollar or USD. They converted to ETH. (Likely SBF did it for them.)