regulated exchanges do NOT offer customers a insurance whereby if exchange went bankrupt, insolvent or charged, people can instantly be settled out and refunded.
the KYC is to police customers to stop certain customers doing suspicious things.
IF KYC was only used to sign people into a group insurance where they would get paid out within 14days of business insolvency. and KYC was only used for this consumer protection.. then great KYC would be a benefit
but exchanges do not use KYC for consumer protection. its used for consumer policing
hopefully one day regulators will start to care more about consumer protection, not consumer policing
Why KYC is extremely dangerous – and useless
KYC on centralized exchanges can help big users if they want to file lawsuits against scammers or trace hackers but those big scams or hacks don't usually happen. For most of users, small users KYC does almost not mean anything useful and helpful for them. They usually accept their small loss and move on.