Reply: We are a Peer to Peer exchange, but NOT decentralized. That means we do have access to customer wallet and crypto funds as we have an escrow system to keep buyer/seller safe from fraud and unnecessary time consuming disputes.
Just because I'm trading with another customer rather than an order book doesn't make your exchange peer to peer. Trades should actually be peer directly to another peer, not peer to centralized exchange to peer. If you have to create an account for me, and I have to deposit coins to that account, and the other party has to deposit coins to their account, and you have complete control over all those coins, then I'm not trading peer to peer. You could provide an escrow service via a multi-sig wallet which doesn't give you access to your user's coins like Bisq does, but if you are holding my coins and my private keys, then that isn't peer to peer trading.
Regarding KYC, to make the process hassle free and fully automatic, we collect KYC via a third party (to make onboarding hassle free and instant)
If you want to collect KYC, that's fine, but you should be forthcoming about it. You can't say "we won't give your details to the government" when the fact of the matter is you would turn everything over to the government if they requested you to do so.
So legitimate users do not have to worry about their privacy.
Absolute nonsense. Every time and every place you complete KYC you have to worry about your privacy.
You need to be clear that you are a KYC enforcing centralized exchange.