I believe there's a misunderstanding between Know Your Customer and "taint". Just because a company knows their customers, it doesn't mean it can trace their customers.

To put it this way: we all proceed to KYC when we make a bank account, or when we register to third parties like Paypal and Revolut. This has long been accepted as a necessary procedure to prevent money laundering. While in such institutions it is trivial to trace where the money goes, since they know all transactions and all transactions are made by identified individuals, that does not apply in the blockchain. When the bitcoin goes out of the KYC exchange, and several peer-to-peer transactions mediate, then nobody apart from the most recent owner can provably identify themselves. Exchanges deeming my coins as "tainted" holds as much water as my bank blaming me for deposing "tainted" banknotes.

That being said, I'm not sure what happens in a hypothetical scenario where you're accused of receiving bitcoin from drug lords. Does anyone know if there's a group of lawyers which have provided some insights regarding this matter, in the Bitcoin community?