Doing KYC and not doing have advantage and disadvantage, the advantage is for the exchange to weed out bad people, knows who they are dealing with and help to fish out users from countries that have been sanction, that is the benefits of doing KYC to any exchange. The disadvantage here is that exchanges are known for non-transparency, they can do whatever please them with people information. I have read where Binance leaked users KYC on the internet that was trending for weeks, such things are the thing we fear of not repeating by other exchanges.
Leaking of KYC is not the disadvantage of it, that is a hacking and you could get the whole hot wallet hacked too and your money would be stolen, that's not really a default state of it. The advantages and disadvantages should be seen from a legal stand point, if it is good legally then it is good, all the other things that illegal people do with it are beside the point because they do not want that to happen neither but it happens because some people are just bad.
I believe that exchanges should always ask for KYC because it makes it that much more legal and that makes it that much better for governments to accept it as it is as well if you ask me. The more legal it gets, the better for the users.