Earlier quoted context omitted.
I don't understand this position. Cryptocurrency exchanges are the primary legal touch point (fiat offramp) for a lot of criminal activity. Of course they will get attention for AML.
I can understand the regulation of fiat/crypto exchanges, but the verification extends to centralized exchanges that merely facilitate exchanges one kind of purely virtual currency for another, neither of which have to be recognized as legal tender.
The counterpoint is that if your job was to prevent/punish financial crimes that affect consumers, would it make sense to ignore these exchanges?
Heck, if M:TG cards were the medium, and they could be moved across international borders with a few keystrokes, then surely those would be watched too.
I won't argue that it's not privacy-invading for legitimate customers, but if the legal structure allows it, regulators have an obligation to look where the problems are expected to be.