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Although the exchange allows traders to avoid KYC requirements for transactions of over 500,000 USDT, for larger transactions, it acknowledges the need for heightened security and KYC becomes necessary.
When KYC policies are implemented, that is the loophole. This number is no longer a trigger for services to ask for user identity at any time under the pretext of violations and the like. Exchanges will not be able to maintain consistent KYC policies if they are subject to certain regulations.
Proper guidelines, prepare for KYC on every centralized exchange even if you only want to trade $1.