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The transactions I would ban are the ones where you convert it into real money at exchanges.

I think you're missing the point. Bitcoins are a 'pool', by your rules, any part of that pool that touches another that is tainted becomes tainted. The entire network would likely be 'tainted' within days.

Apart from the simplest case, where the entire balance of a wallet is traceable back to criminal activity, and is then immediately 'cashed out', it is unworkable, because you are effectively saying that there should be a ban on trading all bitcoin for cash. I doubt your rules would have any effect in the countries where these criminals will be 'cashing out' in any case - it would be a clear case of judicial overreach, for example, for US law enforcement to try to stop transactions in Ukraine, or Azerbaijan. Not to mention that there is absolutely nothing whatsoever to stop one person paying another for bitcoin in real money outside of an 'exchange' - the only thing that buys you is the 'trust' that the money is held in escrow until the transaction has cleared the network, which typically is after the processing of several blocks, so takes an hour or more (depending on how many blocks you consider necessary to guarantee a transaction is confirmed).

Lets also not forget that any transaction on the bitcoin network has a 'fee' which goes to whoever 'mines' the next block. That fee would be coming from the ransom money, so would, by your rules, be tainted. You are essentially arguing that the fundamental mechanism for processing transactions on the blockchain should be made illegal, because you can't guarantee the origin of the fees. This might be your intention, but I doubt it, and it isn't realistically going to stop people using bitcoin, so is entirely moot.