A general note on this subject, not aimed at anyone in particular:

The problem—one of the problems with that type of thinking is that it ruins Bitcoin’s fungibility, and thus ruins Bitcoin’s value.

I’m not making an idealistic argument here.  I am making an argument that hits you in the wallet, based on Bitcoin’s fundamentals.

Right now—as Bitcoin is designed—Bitcoin transactions are closer to being absolutely frictionless than any payment technology that ever came before.  Whether the transaction is B2B, B2C, or between private individuals, A gives B a Bitcoin address, B clicks a button, and—that’s it.  Although the process is scary for n00bs who don’t understand the system, it is actually the easiest payment technology ever invented from the dawn of history until 2008.  That is a large and indispensable part of Bitcoin’s value proposition.

When “KYC” gets its hooks deeper into Bitcoin, you wind up with coins being assigned different “risk ratings”.  It is happening already.  And if coins are assigned “risk”, then to receive coins, you are financially coerced to subscribe to the risk ratings system.  (Perhaps in the future also legally coerced—but let’s start with the part that hits you straight in the wallet.)  After all, you don’t want to receive risky coins:  If you receive “risky” coins from A, and then you try to pass them on to B, and B subscribes to the risk ratings system, then B may refuse to accept the coins as payment.

For the value of money, this is a disaster.  If different same-sized pieces of a currency have different values, then it is not a currency at all:  It is a chaotic mess of non-fungible tokens.  (This is what Mike Hearn wanted; and where is he now?)

For electronic payments, the legacy financial system is encrusted with ugly, cumbersome, unreliable, expensive layers of “fraud detection” systems.  These are make-work schemes for the fraud detectors, who charge a hefty fee to scrutinize your counterparties and reduce your “risk”.  Of course, the people who make money by preventing fraud in a fraud-prone system do not want for the fraud problem to be solved:  If fraud disappears, they lose their jobs!  And of course, the shiny new financial system that we know as Bitcoin is being beset by wannabe fraud-detectors who want to make work for themselves in a system that’s designed to be immune to fraud.

Receiving money in Bitcoin is supposed to be zero-risk.  Control of the private keys equals control of the funds.  Your keys, your coins, at least from the perspective of the payment network; and transactions are irrevocable.

The sanctimonious scum who assign “risk” ratings to UTXOs are actively destroying this property, and thus destroying Bitcoin’s long-term value proposition.  (N.b. that this process is inextricably entwined with “KYC” policies.)  They are trying to turn Bitcoin into a new iteration of the legacy financial system, with all the problems and costs of the legacy financial system—and with the world’s most inefficient database, i.e. the Bitcoin blockchain.  That is the worst of all worlds!  It turns Bitcoin’s value into a net negative, lower than zero.

If you want for “number to go up”, then you should care.