Short answer is because it’s required by governments and it’s dangerous not to comply.
There was someone who asked for references to the laws or at least for information to show where it’s required. Below is an answer I gave them, which I hope might serve as a starting point for anyone interested. It’s not a perfect answer but it should help provide a lot of information and get you on a starting point to research on your own, if you really care to know.
Part of it is buried in https://www.fincen.gov/resources/statutes-regulations/usa-patriot-act
Another portion which might help you is https://www.innreg.com/blog/fincen-cryptocurrency-regulation-foundations-four-key-msb
World Economic Forum
There’s a lot of variations and you have to dig deep to find all the specifics. But most push it under the idea of combating terrorism, making claims that cryptocurrency is used for money laundering and funding of crimes. Therefore things continuously are getting stricter on enforcement and they are constantly trying to regulate cryptocurrency in general. Governments are even starting to look at DeFi, such as you can read about at
It’s kind of crazy all the things going on. But yes, nationally and internationally there’s a lot of specific mandates. One might be able to go through the swamp and make arguments that things like BAT payouts could fit outside of some of those areas.
The thing is, the penalty for not complying can be imprisonment, fines, etc. For example:
So question is, would you really want to risk it if it were you? Governments are big on mandating these things. Even India now is trying to require all VPN and crypto exchanges to do something like KYC and to hold all records for 5 years. This is why it’s required and why Brave has decided to use custodial partners that are properly licensed and following regulations.
It has been teased that Brave is looking into options that will allow them to offer on chain BAT payouts. If done, this would likely be done on Solana. This would be part of Boomerang.
If and when this happens, it would erase the requirement for using a custodial partner. Stay tuned for more possible news on this in the future. They are still going through legal and trying to make sure that this could be done with no issues. Of course, this would also potentially mean no KYC/AML required.