Kyc is actually not bad for crypto as it helps in curbing fraudulent activities on the space. However it is always necessary for those asking for kyc documents to protect these docs in the best interest of their users to avoid these documents leaking to a third party.
However, exchanges are not doing it in the best interest of the user. They are doing it only to be compliant. Also, your private and personal information are not safe. They are usually sold to 3rd parties for profit as
normal practice. They also might give them to a demanding government.
Many exchangers allow withdrawals without KYC but are limited to a maximum withdrawal of 2btc. In my opinion, the exchanger must obey the government rules regarding KYC because there is a fear of money laundering and I think this is a good thing to increase public trust