If on-chain, you feel traceability is an issue for your utxos, then use coinjoins. From my perspective at the protocol level it is fungible. A value in can later be converted as a value out. When people play with Bitcoin to search for "rare" coins, there are just adding new rules which are not on Bitcoin but exist in their world. Similarly even if banknotes have identifiers and hence can be traced this doesn't undermine it's fungibility, since in the real world nobody care in most cases. Fungibility issues may be raised among Monero people, but IMHO it is a weak argument. As a criticism UX of Lightning is more convincing (still LN UX gradually improves over time).