KYC/AML for decentralized exchanges (DEXs) – How are firms squaring this circle?

Been pondering the evolving landscape for compliance with DEXs. With the push for broader institutional adoption of DeFi, particularly regarding $ETH and other smart contract platforms, the inherent pseudonymous nature of these protocols seems to be on a collision course with traditional KYC/AML requirements. Are we seeing any viable models emerge for how firms are approaching user verification on DEXs, especially when dealing with fiat on/off-ramps or bridging to regulated assets? It's a fascinating challenge to balance the ethos of decentralization with the non-negotiable demands of regulatory bodies. Any insights or observations from those navigating these waters would be greatly appreciated.