I am not saying that every trx should be monitored or logged, they can see if a crypto is coming from illegal source like hacked exchange assets or ponzi scheme address and if such crypto enter eXCH platform, least eXCH can do is refuse to process the trade and send the crypto to where it came from (-% fee). Or better to just donate the assets for a good cause.
To know if a tx is from an illicit source, you have to be spying on all tx's. Imagine if every custodial privacy tool like mixers and no-kyc instant exchanges start confiscating funds and attacking BTC's fungibility in this way, people who care about their privacy would stay away from such services, and it does not mean they use stolen funds, but because there is a possibility that their funds can be confiscated for any reason.
As a privacy tool, you shouldn't be spying on people's utxo's or rejecting their funds for mixing, or swapping if it is an instant swap exchange, the moment you start doing that you are no longer a privacy tool, but more like a centralized exchange or similar services.