Now that's a different universe than what OPs lives (just by the fact Bitcoin goes up and down in fiat value would be enough to make it "non-fungible" by that logic), but I can assure you many of us exists.
And I'm not even mentioning how Lightning Network fixes this as well, making coins very hard to impossible to track.
This article is alarming to me as a normie user. I'm curious about going off the big exchanges and using my coins. What if I receive crypto through OpenSea that Coinbase deems soiled?
Although I don't like it, I could see private verification service popping up for P2P. "We make sure the coins are good before the transaction goes through".
Makes me wonder how much of a "walled garden" Bitcoin is. Sure, hold it on exchanges all you want, but don't try to use it or we lock your account.
That being said, those outputs will simply become someone else's problem later on, in limbo created by the uncertainty on whether them being held by an exchange clears their past history or not.
Paper money has serial numbers, but likely nobody record them during the criminal transactions. Even if they KNOW which serial numbers are involved in a crime (maybe they robbed the mint), there's no database that tells them I have that note now and no infrastructure to catch someone from spending it.
(Of course perhaps the money is clawed back because there's text messages on the criminal's phones about buying the couch. But that's another story)