I don't understand the point about physical cash in the quote. Both bank account credit and physical cash are fiat, and also treated as equivalent, therefore something that can be inflated and devalue...
The specific version of the argument being replied to here trades on bitcoin’s resistant properties — that it is harder to tax or confiscate money held in self-custody. A little history is helpful in evaluating this claim. The existence of cash — money held in self-custody — did not destroy the state. So though it may restrain state spending to some extent, the most dramatic version of that objection is likely incorrect.