I think they are asking for KYC because of the amount.
I've done it twice already.
Yes, that could be it. They will probably ask you for a proof of income if they haven't already.
Next time, If you want to avoid KYC when dealing with large amounts, I would recommend going with an exchange like OKX where the KYC policy is more clear. You only have to submit your documents when you want to exceed a certain withdrawal amount. It's less convenient than trading within the wallet obviously, but at least you know your limits ahead.