The only problem with this aproach is that the local exchange needs to do an initial purchase of Ethereum from foreign markets, which is a traceable transaction

The only problem with this aproach is that the local exchange needs to do an initial purchase of Ethereum from foreign markets, which is a traceable transaction. Once they’ve traced the original ETH all transactions flowing out of it can be blocked by the other exchanges. Their options are to either use a privacy coin (Monero) or make the initial purchase underground and somehow hope it doesn’t get discovered.