Since all crypto on smart contract platforms tumbles around in defi and the various decentralized exchanges all the time, this would effectively prevent anyone from depositing their crypto to those exchanges, which would make the exchange unusable.

To expand on that, say someone withdraws ETH from Tornado cash and purchases an NFT with it. The seller of the NFT then swaps their ETH for USDC on a decentralized exchange (the ETH then goes into a pool). Later, a liquidity provider to the ETH/USDC pool withdraws liquidity from that pool, and sends their ETH to an exchange, let's say Binance. If Binance blocked such deposits (and especially if they did so without refunding the user on-chain), no one would use Binance, and they'd also be the target of a lot of lawsuits.