The best way to deal with it is the decentralized KYC repositories with the selective decentralized data control and the forced data fragmentation for every step of its processing and storage. I won't name any project, yet there are some. They will certainly have difficulties working out a deal with countless government agencies, yet it looks doable without screwing safety entirely (I've discussed it several times at think tanks, there are solutions).
This is the best way to balance the privacy interests with the KYC/AML/CFT requirements. Entities that perform crypto/fiat conversion are generally licensed in some form in their jurisdictions. My view is that these entities should participate in a decentralized pool. Access to specific information on file will be by permission only (i.e. you give permission to XYZ ICO/ITO to access the minimum information necessary). It's similar to how credit reporting agencies work, they keep a file on everyone that is accessible (normally) by your consent only. This will be much tighter data control than those old databases, obviously, and the data allowance will not be "all or nothing", there will be different levels of data available based on what is required by the ICO/ITO. It's one of the ideas that we've got on tap for FinTech SRO, should help to greatly reduce fraud and potential identity theft/KYC data theft issues.
Best regards,
Ben