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That law would fail because there's no way to prove the transaction didn't come from someone who wants to cause trouble for the registered person but whom the person doesn't actually know. Suppose you are angry at a merchant who takes bitcoin:

1. Create new bitcoin address.

2. Receive bitcoins from someone for cash.

3. Send them to merchant's public address.

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If it's money they're not expecting, no problem: they just declare and forfeit it to the tax authorities, like a bag of cocaine-drenched cash that was found in their store.

If it's money given to them in payment for goods/services, they reject it as non-legal tender. "I'm sorry, sir, we can't take that form of payment, do you have another?"

Software makes this very easy... even automatic.

Wouldn't this open up the possibility of a DDoS-type attack performed by having millions of transactions of 1 satoshi (0.00000001 BTC) in dirty coins flung at the merchant by someone's botnet? It would force the merchant to reject each one at a computational cost, whether by giving the money back or by transferring it to the government.

Interesting problem, but I don't think it will actually be that big of an issue. The merchant could generate a new wallet for every customer, and simply "dump" any wallet under attack by said customer.

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