Federal reserve notes have serial numbers, which may be recorded when placed into an ATM. Perhaps they then look at which bills with withdrawn by which account and/or retrieve ATM video footage. Or maybe I've been watching too many police shows.
recording a small serial number from a blurry, black and white, 480*360 camera? good luck.
No, I meant that the bank may record which bills were placed into which machine. Then, the police do a reverse lookup on the serial number, finding the bank. The bank then tells police which ATM they were last placed in and the police watch the video camera footage from the ATM to see who makes withdrawals. I think I actually saw this on Castle, so I'm not sure if it's viable or not.
If bob pulls cash from the ATM (let's pretend it's fully tracked and monitored) and then a 20usd bill of his cash is found in the big DEA drug bust, Bob has plausible deniability. All he has to tell the cops is that he used that 20usd to buy his daughter some ice cream from the ice cream truck earlier in the day. Case closed.
With btc Bob does not have plausible deniability, because every single BTC transaction is documented.
I find myself spending a lot of time trying to pull people away from a vision of BTC that they want to be true, versus the reality of it.