It's been discussed several times... Many people are "trapped" into cryptos and can not get out (for example because their bank will close their account and kick them out if they do anything crypto related). So in several countries it's only when you sell for a currency that is legal tender that it's a taxable event. It's the case in France and, if I'm not mistaken, it's been clarified that it's now also the case in Germany.
It makes sense in a world where people are taking a very big risk by selling for a "stable" coin. For the last thing you'd want is people selling BTC for Luna / UST, and then owing the state, say, 100 K EUR, only to then see Luna going to zero. Some of these people would have their lives ruined if the taxable event happens before they're able to cash out to a currency that is "real".
If anything the Luna / UST fiasco as shown to many that it makes sense to only tax when something is sold for a real currency and not for monopoly money.
>Some of these people would have their lives ruined if the taxable event happens before they're able to cash out to a currency that is "real".
Sure this is a downside of tax law on the US, but it’s not unique to crypto. Suppose you sold one stock and used the proceeds to buy another stock, which then went to zero. It doesn’t matter whether you went to cash at some point, or if somebody exchanged the stocks with you directly. Either way, you owe taxes on the gains in the initial investment. Depending on timing, the gains and losses might cancel each other out, or you might end up with a tax liability in some year. You still need to report it.
This is a special case of an even more general problem: “I was rich, paid taxes, then later became poor.” A lot of the time, the tax man is unsympathetic.
It makes sense in a world where people are taking a very big risk by selling for a "stable" coin. For the last thing you'd want is people selling BTC for Luna / UST, and then owing the state, say, 100 K EUR, only to then see Luna going to zero. Some of these people would have their lives ruined if the taxable event happens before they're able to cash out to a currency that is "real".
If anything the Luna / UST fiasco as shown to many that it makes sense to only tax when something is sold for a real currency and not for monopoly money.