[everfree]

In practice, there will always be at least one exchange that lets people trade coins that are tainted by some measure, because that particular exchange's idea of taint does not implicate the history of their coins.

Once a person trades coins at that exchange (perhaps even into a different cryptocurrency for additional obfuscation), then in the eyes of the other exchanges those coins will become disconnected from the activity they are trying to hide.

[ricardobeat]

Other exchanges will simply stop accepting coins that have been through this particular exchange X. It is the case already, as seen in the article.

Once that happens, why would exchange X take your BTC, or any other people exchange other crypto for BTC there, if they can’t circulate it?

[everfree]

I don't believe that it's feasible for all other exchanges globally to agree to coordinate to block coins that have ever touched exchange X in their ownership history. It's too much of a global coordination problem.