As well as bitcoin not being practically fungible as others have pointed out, traceability is actually a big part of that. Bills are not traceable like bitcoin

As well as bitcoin not being practically fungible as others have pointed out, traceability is actually a big part of that. Bills are not traceable like bitcoin is. They have a serial number so they are identifiable, but only at the point you receive it so not very traceable and in practice impractical to identify in most cases. You can bet if the feds could feasibly blacklist bills that were stolen from a bank or held by a cartel or terrorist group, they would. But they can't. This non-traceability and difficulty to identify is what underpins their fungibility. Bitcoin's traceability is what causes its non-fungibility. Bills are not traceable like bitcoin is.