The only way it could even plausibly work is for every visible and darknet service in the world to subscribe to and abide by the exact same crypto-wallet blacklist. Good luck making that happen when nuclear superpower governments are in fact transnational crime syndicates.
Assuming that the tracing capabilities are useful for anything beyond taking down the amateurs is overly optimistic.
The problem is that to kill ransomware, we would need a near-perfect system, and that is extremely unlikely, or thee will be substantial leakage, and continued profit for ransomers. I'd say it'd be easier to entirely shut down crypto globally than to ransomware-proof existing crypto.
Probably means that the real solution will be to do both. Sanction only fully traceable cryptocurrencies and shut down the rest.
Focusing on controlling onramps and offramps to cryptocurrency, like controlling goods import/export, is a relatively straightforward compromise to this internal dilemma and allows the government to be a player in the space without much direct oversight, even if some folks are slipping through the cracks. A sloppy, haphazard enforcement is likely to prevail.
And there's another way to reassert state control within that framework. If the bad cryptocriminals come for your stuff, the government can bail you out - if you play by their rules. The loss compensation mechanism is a simple plan to mitigate dangers, since it's easy for governments to create and redistribute credit internally and doing so can build consent.
Submitting to this framework does mean that the government is truly in competition with decentralisation to provide a better, more trustworthy service to handle central credit, and has to massively step up security efforts in the process. Everyone started "asleep at the wheel" on this, with individual tech firms all building out their own insecure house-of-cards fiefdoms and relying on the intellectual property law framework to keep them up. But everyone knows it's flawed - of course you can copy, what's important is if you can get credit, and that part is also changing with the crypto sector - assignment of credit is the whole thing of NFTs in a nutshell. The nation that can grasp this the quickest and turn it into a coherent part of their economic framework will cruise ahead.
Will any substantial number of govts have the foresight to setup such a system of on/offramp controls + rules/bailout + investigation and enforcement soon enough?
If the ransomeware plague stays in the non-critical commercial realm, it would work
The key looming problem I see is that it is already sanctioned by criminal adversary nation-states, and there will be a lot of profit temptation to go after critical or military infrastructure - some ransomware gangs are just going to be that short term 'smart' long-term stupid. A sufficiently serious enough attack could cause war-level damage...
Also a hacker could just buy something with the coins between the time the victim sends the money and the time the government is notified.
As for timing, either blocking spending or tracing the transaction back to a person is equally valuable as a deterrent.
Coins used to pay ransomware should effectively taint and freeze everything they touch.
Of course every jurisdiction would want to be in on the “free” bitcoins so lots of complications...
How would they know if the coin is from ransomware? If the randomware criminals say it's not, so it's word against word? And if they accepted just one payment to the wallet (so there's not a pattern of accepting money from strangers)
Or if the organization that got broken in to, doesn't want to be public about that? (Doesn't want to talk with the government)
(I don't know much about crypto coins.)
From criminals perspective they probably have money launderers on darknet markets who are willing to take the dirty crypto, deduct their hefty fee and offer clean crypto instead.