The legislation of several countries obliges you to declare the mere possession of cryptocurrencies.
Those laws are still being debated, as far as I can tell. No (reasonable) country can punish you for holding bitcoin you didn't declare for 10 years when they are only just making it mandatory to declare it now.
Yes, normally in democratic countries you cannot be punished with retroactive laws. What could happen is that today the law is approved and from today you have to declare what you have, even if you bought it years ago. If you made a single purchase and you can justify it, fine. But if you were trading in several exchanges, one of them has already disappeared, and you also have gone through mixers, declaring that you have $200K (or $2M) of origin that you cannot justify will lead to an interrogation by the authorities at the very least.
Still, I assume they will want a simple statement of "I own 1 BTC", as opposed to wanting you to report individual wallets or addresses, given that lots of people holding their coins on custodial exchanges and wallets and so wouldn't be able to provide such information. So there is a still a significant privacy improvement from government surveillance (not to mention surveillance by third parties) by using non-KYC peer to peer trading over centralized exchanges.
Yes, more precisely, they want a statement of "I own 1 BTC which as of 12/31 of last year was equivalent to x dollars or euros or the currency in question. As there is no market close as in the stock market, it would be at 23:59:59."
Even if they don't have an explicit law requiring citizens to disclose their Bitcoin holdings, wealth tax does not usually exceed $1M by much. So you should declare your holdings when you exceed that figure.
So how does that work in practice? You take the average value of bitcoin over the year? Or you take the spot value of bitcoin at the end of year?
The spot value of bitcoin on December 31 of that year. The same applies to shares.