If virgin coins are banned too, it gets even worse and Bitcoin is definitely not fungible anymore!
Bitcoin is already not fungible for the exact reason you point out - some exchanges and other centralized services will lock accounts and freeze deposits if the coins can be traced to darknet markets, coinjoins, etc., despite having no idea if the coins were in the possession of the user depositing them at the time. It is possible to sell "virgin" coins at a premium.
I have never experienced an issue with this, despite all my coins being mixed, coinjoined, or otherwise obfuscated, as I simply refuse to use any centralized exchange or service, or use a payment processor such as BitPay which discriminates against certain coins. I'm under no illusion that this will last forever though. If the merchants I use want to use a centralized exchange, then they won't want to accept my "tainted" bitcoin either, regardless of how stupid the blockchain analysis which "tainted" them in the first place is.
With some mining pools now only mining "whitelisted" transactions, we need more on-chain privacy urgently, before "tainted" bitcoins won't be accepted anywhere, can't be sold, or maybe even can't be moved at all.