DeFi and the Perpetual Motion of AML Scrutiny: Where's the Line?

Been following the increasing rhetoric around DeFi and regulatory compliance, particularly with AML. It feels like every quarter there's a new pronouncement from various bodies about the need for protocols to implement stricter controls. The irony, of course, is the whole 'decentralized' aspect. We're seeing some projects try to thread the needle with on-chain identity solutions or tiered access based on KYC, but it often feels like a band-aid on a gushing wound from a regulator's perspective.

My core question is this: at what point does the regulatory push effectively dismantle the core value proposition of DeFi? If every significant interaction requires a validated identity, aren't we just building a more complex, less efficient version of traditional finance, albeit on a blockchain? And how do teams, especially those with genuinely decentralized governance, even begin to implement these controls without running afoul of the 'no central point of control' ethos? It's a fundamental conflict and I'm not seeing a clear, scalable path forward that satisfies both sides.