But it is individuals, not governments, who mine Bitcoin. In fact, the people who mine Bitcoin don’t like governments very much, and wouldn’t cooperate with a government-imposed Sybil attack that would devalue their state-independent store of wealth, any more than they would cooperate with said government going to war with a country they’ve exported all their investments to. Such people would actively seek to use their wealth to oppose such a government.

If a government moved to confiscate all mining operations and run them itself to perform such an attack, the fight such people put up against that would be so obvious that it would be incredibly easy for parties external to the situation (Bitcoin devs + Node operators outside of China) to stop any ensuing Sybil attack. They’d just blacklist Chinese IPs from the network statically in the client code—effectively hard-forking the other 49% of the network in advance so it doesn’t later become confused.

> But it is individuals, not governments, who mine Bitcoin.

Bitcoin mining has outgrown this stage. It's more like companies, now.

> the people who mine Bitcoin don’t like governments very much, and wouldn’t cooperate with a government-imposed Sybil attack...

Early Bitcoin proponents don't like governments much. Chinese miners are another story. They see a business opportunity and have no interest in losing social credit points or, worse, going to a labor camp.

Because the government cannot afford the resources to untangle it all, and the rich can afford the lawyers to exploit all the loopholes, and cover the tracks after little white-collar crime "indiscretions". Who funds the lawmakers who make the tax laws? Ah...

Myself - I pay my 28%. No loopholes.

Cryptocurrencies are absolutely taxable — at least in the USA. It’s a gigantic pain in the ass that I feel every April. I don’t know why the USA makes taxes so painfully difficult and complex but that’s another topic and something they can improve on.