You can have a dirty wallet from crypto that you've gotten illegally. If you are a merchant on a darknet market your wallet is dirty. If you wrote malware and g

You can have a dirty wallet from crypto that you've gotten illegally. If you are a merchant on a darknet market your wallet is dirty. If you wrote malware and got someone to pay you a ransom you have a dirty wallet. There are basically an infinite number of ways to have a crypto address with significant holdings that the government has "frozen" so that it can't be converted to fiat. Of course there are other strategies for laundering crypto, this one has the added benefit of actually making money instead of losing it.