The reasons for KYC in crypto are
- The government does not want people to run their own money system free from taxation.
- Banks were jealous crypto was unregulated, eating into their profit. They had a lot of regulations forced upon them after the financial crisis of 2007, the result of years of deregulation.
- Banks again. They want to slow down crypto adoption to catch up and corner the market with their own tech.
- Officially to prevent crime and terrorism, but in reality FUD to get public support for regulations for the reasons above.
Depending on how crypto friendly the country is the steps to take can range from trivial to making your life a hell. Just look at the US IRS, requiring people to declare tax on every crypto transaction.
Thank god that is not where I live, I wouldn't know where to start...........
In some places that will remain a requirement, whether it is a privacy coin or not. Even if you would use Monero or DUSK in the future to obfuscate your transactions, once you deposit a large amount of fiat money seemingly out of nowhere (a crypto exchange with fiat gateway for example) to your savings account, your bank will warn the tax office and then you got some explaining to do.
In my country, they warn an institution called as financial crime investigation commission. They check it first, if you can't tell the source of the money that is a big problem. If you say and it seems you make a profit from something or received money in return of some service and etc., they are warning the tax office which is also problematic.