Saying we don't need covenants because we can do them on a layer 2 is a gross misunderstanding of the entire point of covenants.

Covenants main benefit (in my opinion) is to enable multi party protocols / layer 2s. Without them we can only build 2 party protocols (lightning) without putting huge complexity and availability requirements that defeat the whole purpose.

This argument comes from the block size wars where it actually made sense, we don't want every transaction to happen on-chain, we want them on higher layers. Advocating for covenants is actually a continuation of this, we don't want to do an on-chain transaction to on-board every user onto bitcoin, ideally we can group hundreds to thousands of users into a single utxo and have them be onboarded in an infinitely cheaper way.

We can't do covenant functionality on a higher layer because we need covenants to be able to build the higher layers.