Liability. If a "prohibited" transfer is made from this address (e.g. buying something on the dark web), the person identified can be held liable and convicted for this "crime".
Sorry, it makes no sense. The user is already KYCd by the exchange and potentially liable for anything downstream, with or without this snake oil protocol.
As others already pointed out, it just adds one transaction to the path. Withdraw to your wallet, then mix.
I see it as something that doesn't and can't work, whatever the final goal is.
