Depends on the jurisdiction. In most European countries for example, you only pay tax when cashing out
Example:
Sweden taxes your gains when you transact a cryptocurrency holding, also when you exchange from one cryptocurrency to another. [1]
Same for Denmark [2].
Check your relevant tax legislation for your local rules.
[1] https://skatteverket.se/privat/skatter/vardepapper/andratill...
Cashing out meaning "selling crypto for fiat"?
What about if you sell BTC for another crypto or for gold or ...
So it seems from the outside that stablecoins exist primarily to take advantage of grey areas in taxation legislation - and possibly also KYC/AML legislation - which allow investors in certain jurisdictions to avoid taxable events which would otherwise occur when trading.
Building a business model on dodging taxes isn't a great look, is it?