So every transaction can be traced to its origin. If I connect to the network through TOR and generate 50 BTC, and then buy some substance with it, it's very hard to trace that to me. But even if I bought coins at an exchange, and they, as required, have verified my identity, I can still do the following:
- create another wallet (possibly online, like instawallet)
- transfer some BTC to that wallet
- buy substance with that second wallet
- erase that second wallet
now I can always say in court that I paid some other guy for his service (drug withdrawal consultancy?) and that's him who later bought the substance. While obvious lie, can that be considered a proof beyond reasonable doubt that I indeed bought the substance?