The whole concept around KYC is to know who is doing transactions, because they could be bad actors, involved in criminal stuff.
But that is a bit like saying, everyone who uses fiat cash to buy a coffee, or pay a gas bill, needs to be identified, because one day a bank robbery may happen.
Sure bank notes can be traced via serial numbers if law enforcement needs to.
But why every user of cash needs to provide photo ID is not clear.
Bad actors use suitcase of fiat cash, of offshore accounts.