Politicians must be checked
As the Terra debacle unfolded, many of those in the crypto space acknowledged that increased regulations are right around the corner. It's important as crypto enthusiasts that we support lawmakers who have taken the "orange pill" (such as Cynthia Lummis) over others like Elizabeth Warren.
While members of both sides of the aisle are starting to work together in creating fair regulatory frameworks, we must always pay attention to their true intentions. We must remember the cypherpunk ideals that made crypto what it is. Given Bitcoin and (most) altcoins allow you to transact semi-anonymously, it's clear that KYC (know your customer) guidelines are worming their way to the top of radical politician's agendas.
The warning signs
Centralized exchanges such as Coinbase already participate in KYC due to existing regulations for financial brokers. There isn't much we can do about this, but it's a foolish assumption that lawmakers would stop there. Since cryptocurrencies are built on the foundations of decentralization, KYC is inherently against the ethos of crypto. In fact, it would almost completely defeat the ability to transact in crypto at all.
The whole idea is to protect your identity and unbank yourself through various tools in blockchain ecosystems. You can bet that lawmakers will piggyback off their previous regulations to enact new DeFi regulations.
As shown by this recent CoinTelegraph opinion piece, some in the crypto industry actually are supporting the idea of KYC guidelines. The article talks about utilizing zero knowledge proofs as a private way to verify a DeFi user's identity, saying "Users can share this ID with a DEX for verification purposes without the need for a centralized repository of information."
The problem with this notion is that once you have "verified" yourself with a DEX, you now have a unique identity on the blockchain tied to your one in the real world. While this is a better solution than others, it is still a breach of privacy, and these are largely irreversible actions.
The article touches on DeFi being centralized through Metamask among other reasons, but this is no excuse to make it even more centralized than it already is. Since you can already be found quickly on most chains (other than Monero) through chain-analysis using your unique blockchain addresses, KYC on top of that is a very problematic philosophy.
How to protect yourself
A good idea is to watch out for politicians claiming that KYC enables "safe DeFi" or "compliance." Despite some hacks, most legitimate DeFi projects have held well up to previous threats. These buzzwords are attempts at convincing people that these regulations are designed to protect you, not actually control you.
At the end of the day, if the individuals in power are tyrants, the best option may be to simply avoid protocols that enact these potential KYC guidelines. The most important method in reducing this phenomenon, though, is to only support politicians that you trust, while voting out the authoritarian ones. We can minimize the potential damage caused by KYC to crypto by performing these tasks.