Cryptocurrencies have long made promises of decentralisation and fairness and, despite that, people still centralise around exchanges in the same way that people centralise around traditional banks. To that end, what the exchanges do is far more important than people seem to think. Financial institutions have always operated on a reputational basis and KYC has long been important to that (if nothing else because it allows them to shift some liability).

In theory, anyone can run a bank. That doesn’t mean that anyone else in the world has to trust your bank if they believe that you represent bad actors or don’t take due diligence. There’s currently no reason to believe that cryptocurrency exchanges will (or should) be any different.