Only if you sell it. One way is when someone chooses to get a loan agaist the asset instead of selling it. Of course, a lender would be crazy to loan against the future value of BTC.

Lenders have been doing great lending against btc and other digital assets. They all set up systems to immediately liquidate the borrower and also sell the asset (or hedge against it).

Its the borrower that amplifies their risk.

But if a borrower collateralizes well enough it is much more tax efficient for them.

These are solved problems for 2 years.

And yes, that is an additional example about why assuming there is a capital gain or loss merely from seeing the flow of crypto through a Coinbase account is misguided.

Could be just a tax deductible interest payment to service a business debt in a sole proprietorship. Its simply not up to Coinbase to determine or the IRS to assume either.

Coinbase is getting better about it if you use their own products for staking and earning. (1099-Misc, 1099-K). But they are still doing it wrong for people that use crypto properly and keep personal off-exchange custody of assets.

Using your bitcoin to purchase something after it has appreciated is the same as selling it, and you owe tax on the difference in value.

That’s how it also should work, if you are using a volatile asset. Not everyone using crypto is using volatile cryptos, and not everyone using volatile cryptos is holding them long enough for capital gain/loss to be the primary concern, meaning there is likely a more relevant tax report such as a income tax or a deduction against income tax.

So the assumption is flawed. The priorities in reporting are flawed.