I got the same problem. I'm using Kraken for years and was very happy to not have to give any ID proof during all this time. I told to many people to go there. I've been upset with the last change. No choice but I sent all the needed papers. I need at least 1 exchange on which I can rely for a quick bank transfer out, and Kraken is unbeatable for this matter.
I suppose this applies when you trade bitcoin for fiat, right? What if you traded only crypto? Would KYC be also waiting around the corner if you traded just crypto/crypto pairs?
I really like the Kraken exchange, but all exchanges seem to go in the direction of of asking KYC for everything. This is a disaster, and we really need some decentralized trading platform with good liquidity to replace them all.