So I've a question about situations like this. I believe that a chain of transfers can be created with bitcoin. So couldn't a blacklist be created? That would allow users to ignore illegally obtained coins?
In theory yes, in practice no. There is nothing in the bitcoin design to allow this. The only real way to do it is to fork bitcoin and to get everyone to change to your new rolled-back block chain. Not everyone will agree (since co-ordinating all these people to change at about the same time is hard), and hence you'll have 2 different versions of bitcoin.
This also removes features of bitcoin that some view as advantages, namely that there are no chargebacks and no-one can forcibly remove your funds. In bitcoin, once you have it, no-one can take it from you (unlike, say, paypal). This has disadvantages if you're the victim of a theft. Bitcoin is also a decentralised system, so you'd have to convince everyone that you are the victim of a theft, and that these transactions are to be rolled back. Other wise someone could pay for a service in bitcoins, then try to get everyone to roll back the transaction, and hence deprive someone of the bitoins.
