KYC is the illicit activity, so why does bisq support KYC?

I read your post on the other thread about the exchange participating on Bisq.
My wish is also that in the (near?) future Bisq requires of all traders to update their accounts to declare whether they are trading as natural person, business, exchange, and also allow a global setting in the app, and/or a specific/override setting in the account details (multiple selection checkboxes?) to (dis)allow trading with selected account types.

Hi I agree that the data from users local Bisq instances does create some concerns.

I think always ensuring your Bisq has to be accessed via a password is good practice.

Also see the similar discussion about your concerns here: Encrypt or remove saved trader chats and trade data on local Bisq instances · Issue #5396 · bisq-network/bisq · GitHub

I think that anything that has involves a bank, including fiat and especially SEPA, is not anonymous. Any time you use banked assets, you are probably giving somebody or other an opportunity of making a government record of it.

I don’t see it as Bisq’s job to overcome this. If you are worried that the bitcoin you buy or sell through Bisq is somehow connected to you, it is up to you to use well-known techniques to break that connection.

But, as for fiat transactions, didn’t you have to withdraw it from a bank at some point? Or, perhaps, you are getting it in a way that isn’t legal. Then, I can’t help you.