To that point...

In some ways Monero is no different than physical cash.  You deposit it at the bank, they have a record.  You withdraw it... they have a record.  In the same way you buy Monero at Coinbase. they have a record.  You sell it, they have a record.  Deposit it... they have a record, withdraw it... they have a record.  They follow their AML/KYC stuff and they know what they need to know about their customer.

The differences are this.  Did your Monero come from a Poker site?  No one knows.  Coinbase doesn't know.  So there is no need to blacklist it.  I don't think Coinbase really wants to have to be the police.  They want to be an on/offramp for crypto.

Coinbase would be crazy not to want to support fungible crypto.  It would make their lives lots easier.

And it leaves the police work to the police.