You can create a Bitcoin address simply with random data, and since you can transfer Bitcoin without an intermediary it’s trivial to bypass any list of suspect addresses.
Further, you don’t throw a party with a list of people not invited. It’s super ineffective to try to globally block an infinite list of bad.
Fungibility of a currency is actually important for it to be effective as a store of value. If my 1 USD is somehow worth more at the supermarket because it previously was owned by Elon Musk.
That said it’s not entirely impossible to track the source of origin of a Bitcoin transaction. It’s just computationally very expensive. Since you can programmatically create wallets and transactions that can obfuscate the origin of transactions. So by the time the funds reach any exchange the money has changed hands too many times for them to reasonably be able know if the origins of digital coin came from illegal activity. Then, by the time they do know it was stolen the funds are gone.
Here’s the punchline though, since most exchanges do in fact keep records and the blockchain is an immutable list it’s only a matter of time till the software/computing resources adapt.
