Well, Kraken is KYC as a whole. You can't use it without KYC at all.

KYC just requires you to have the address of the customer on file. Kraken very clearly gathers your documentation when you create an account. KYC != "we need the complete financial history of every unit of value you deposit with us." That's not how it works. You can deposit cash in a bank and they don't know where that dollar has been (statistically, it is absolutely a party to a drug transaction and even almost certainly has cocaine residue on it!)

Because one monero is the same as every other monero because it is a fungible/homogenous unit of currency with no surveillance/regulatory attack surface. Bitcoin isn't. Each Bitcoin has a totally transparent and traceable immutable history attached to it allowing chainalysis/exchanges/regulators to discriminate on certain coins due to association with blacklisted addresses, hacks, thefts etc. This discrimination is arbitrary and depends on the entity analyzing the coin's history. Because of this when you deposit a BTC coin on exchange there is a risk score associated with it based on past ownership and transaction history, whereas this is impossible with monero. Monero is like accepting a cash payment, where every note is basically indistinguishable from another, where Bitcoin is risky to accept because ten transactions back it could have come from a hack or theft, and even if you were not the perpetrator you could still be blamed and have your coins frozen or seized through guilt by association. With monero there is no history, an old xmr coin has the same history as a newly mined one.

Somehow that's how it works with bitcoin but not cash, interesting. Despite the fact that cash is not actually that fungible (serial numbers, marked bills, digital bank ledgers) people use it fungibly quite often yet, given the same parameters bitcoin seems to fail your fungibility test. Why is that? It can't be tracking, ATMs read every serial number and which account withdrew them. The only difference I can see is that the ledger is public versus a private bank's SQL database. I agree that Monero has great fungibility, I dispute its network effect capabilities but that's an entirely different point.