Just as in the case of food, there is also kosher money and non-kosher money.
Regarding kosher money, that is, money acquired honestly, though not yet holy, one is nevertheless permitted to derive benefit from it, and so it may be used in the performance of mitzvot.
By contrast, it is absolutely forbidden for one to derive benefit from stolen money.
Thus, it cannot be used to perform a mitzva and cannot be elevated to the realm of holiness.
In this sense, when the halakha rules something to be forbidden or permissible, it is in fact determining that item’s essential character.
Halakha assesses whether it can be rectified and elevated to a state of sanctity.
This is not a legal determination, where the court decides whether someone has committed a particular act or not, or whether one is guilty or not.
It is not a moral determination founded on an external construct of presumptions.
Rather, it is an evaluation of an entity’s intrinsic nature, the final determination of whether or not it can ascend to the realm of holiness.
Rabbi Adin Steinsaltz