Well, how do you trace a stolen cash? There is a simple answer - you don't. You can't trace it. So this is not the problem of Bitcoin. Solving this problem would lead to cryptocurrency losing it's advantages. Becausew, common, do you really want your transactions to be unanonimous, and YOU would be identified? Let's say you store 10BTC on your wallet, and everyone can see the wallet with 10 BTC on it, do you want your name next to it?
Actually I had different vision -- let's say I stole 10BTC from you and everyone can see that transaction. All following transactions from my wallet can be tracked. And eventually one of the child transactions might make it possible to track me back. For example if I ever change BTC from my wallet to USD on exchange that requests identification, exchange will know my personal details and knowing that my wallet was involved in illegal activity will notify somebody (now sure who exactly should do such investigation, but let's call them crypto-police). And crypto-police will do the justice.