AML seems a non issue too, as the loan only moves the question.
KYC remains one big problem but there are many startups providing those services and they are slowly gaining acceptance in courts.
Don't be impressed if a few years (and maybe even months) from now you start to see classical banks trading mortgages onchain.
It doesn't.
AML seems a non issue too, as the loan only moves the question.
No, anti-money-laundering laws are at the heart of why the financial system can't do this. KYC laws apply at the customer level, so you only need to handle KYC once per customer. AML laws apply at the transaction level, so you need to apply them to each loan.
Cryptocurrency solves absolutely none of the existing legal reasons that banks can't issue large loans in minutes or seconds to existing (or new, well collateralized) clients.
Yes, this is definitely correct in that crypto does nothing to solve the legal requirements of the banks and does not help the banks.
But it's worth mentioning that this sort of fully collateralized and anonymous borrowing does not (and would not) happen through banks, but through platforms like AAVE and Compound. It's a financial tool separate from banks. And these tools cannot be shutdown, as long as ethereum exists, these tools exist.
As for anonymous loans, those exist solely to service criminal customers, so that is not an advantage of cryptocurrency.
And overall, it's a demonstration of a financial product which can only be built in the space of decentralized finance. I do not know of another tool which allows anyone around the world to borrow significant amounts of money anonymously and without an account. Whether it's a net good for the world I don't know, but I do believe it's a powerful technology and space.