KYC means providing government ID, address, and sometimes source-of-funds documentation. Regulated brokers, cexes, and prop-firms all require it. A dex does not, which is a feature to some and a risk to others.
Withdrawals are often where enhanced KYC kicks in, which surprises people who deposited without much friction.
Example: a trader funds a crypto exchange account with $2,000 and trades for a month. On requesting a $9,000 withdrawal, the exchange demands proof of address and a source-of-funds statement before releasing it.