Let’s see ...
Gold is fungible in principle, as 1 oz. 24 K gold is indistinguishable from any other. That is an inherent physical property of the element, which facilitates its use as a currency.
Bank notes have no such property: they have serial numbers (to fight counterfeiting), and can otherwise be marked. In the 1749 Crawfurd v. The Royal Bank of Scotland case, it was ruled that despite lack of inherent fungibility, the law will not consider any genuine bank note to be different from another, lest their use as currency be hindered, and commerce along with it. In other words, government issued bills are fungible by decree.
Like gold, Bitcoin is fungible in principle, since, as rocks has argued, from the network’s perspective, 1 BTC = any other BTC. The coin is designed to have this property to facilitate its use as a currency.
However, some jurisdictions may decide to:
a) Impede BTC from gaining currency status. One way of achieving this, as Peter R notes, would be to place enforceable legal restrictions on fungibility.
b) Attack BTC fungibility, not necessarily to prevent it from becoming a currency, but to achieve other policy goals, such as combatting money laundering, illegal trade, or tax evasion.[1]
This leads to the question: could legal restrictions on BTC fungibility be technically enforced?
Bitcoin proponents argue that legal restrictions on BTC fungibility would probably always be defeatable or circumventable. On this view, legally restricting BTC fungibility would be like banning the melting of gold: unenforceable in the long run. This, in turn, makes it unlikely that such restrictions would be imposed in the first place.
Monero advocates disagree, because of bitcoin design features, and because legitimate BTC-accepting businesses operating in the relevant jurisdictions must comply with regulations.[2] In addition, they make the assumption, based on prudency, that legal restrictions on fungibility will inevitably be placed on cryptocurrency. Accordingly they have developped a coin for which, as far as they can see, it is technically impossible to enforce such restrictions.
In my eyes, this points to a significant divergence between the positions of BTC and XMR proponents. BTC proponents expect to legally use BTC as a fungible currency -- they may be foiled. XMR proponents anticipate going rogue -- they trust their tech., but cannot expect to use it for open commerce. BTC adopters want a currency suitable for the open market. XMR adopters are building a currency suitable for the black market.
There seems to be room for both.
[1] Note that attacking fungibility is not the only way to pursue such policy goals. The USG currently pursues them in the dollar economy by means such as asset forfeiture, or the ability to freeze bank accounts (these powers can be asserted previous to any court mandate, i.e., without demonstrated guilt), or by placing restrictions on the deposit or withdrawal of cash from banks, or on moving cash across borders. Some though not all of these means can be used in the BTC economy as well (Coinbase *will* freeze your account or seize your funds if so ordered).
[2] And indeed, according to one source, the BTC economy is in fact fragmented into KYC and non-KYC segments.
http://www.ofnumbers.com/2015/04/22/the-flow-of-funds-on-the-bitcoin-network-in-2015/