Navigating the New KYC/AML Waters for DeFi Protocols

It feels like every other week there's a new pronouncement from some regulatory body about how DeFi needs to 'grow up' and adopt traditional finance's compliance frameworks. I'm curious how protocols, especially those aiming for broader institutional adoption, are squaring the circle on decentralization while simultaneously building out robust KYC/AML frameworks for their on/off-ramps. It's a tightrope walk, isn't it? One wrong step and you're either a regulatory target or you've alienated your core user base. What are the practical, non-euphemistic solutions you're seeing being deployed for identifying suspicious activity without completely doxxing every participant?