NewPipe, and YouTube Revanced are great apps you can use on mobile. They aren't attached to any Google account so you can just use them and skip adds all day without getting any account theoretically banned.
For those who continue to use YouTube and adblockers on PC, simply just make a new throwaway Google account. In the case that they aren't actually bluffing (they are) then at least your temp account will be banned.
Revanced is great because it lets you watch without ads WITH Google account. I know that if you're focused on privacy the last thing you want is Google account but for me the benefit of YouTube algorithm suggesting me exactly what I want to watch is enough the reason to not use any platform/app that doesn't support login.
Of course they need to try more before I'll pay for premium. For now if that dialog ever shows up to me I'm setting my UA to Android and see if that happens on mobile YouTube as well. Since they don't care too much about that version of YouTube it's possible that dialog will not show up. If that's blocked too I'm installing waydroid and revanced on it.
Also I hope that development of VueTube will speed up because currently it's so slow I'm not sure if it will ever be finished and it would be great to have alternatives to revanced.