I'd personally prefer they didn't implement any KYC-style identity verification at all in the first place, but it's not my service or project and I'm not a paying customer, so my preference is largely irrelevant to them. But that said, I didn't intend the comment to be damning, or even a particularly harsh criticism, just thought it wad an odd choice.
If what you are saying is accurate, and there aren't better options, I at least understand that choice a bit more. If they feel they need an identity provider for whatever reason, they should obviously choose the one they feel best fits that need. And as others have noted, different servers and instances can be spun up or utilized. Users can choose to utlize whichever fits their needs best, or none if none of them fit.
Your other point is well taken though that it may be a gap in the marketplace. Sounds to me like a need waiting to be filled. I recall reading about some decentralized blockchain solutions for this sometime back, but do not recall the specifics. I haven't followed along because it didn't seem relevant to my personal or business needs at the time.
If anyone else knows of alternative options that may be better or more privacy friendly, I'd certainly be interested to hear about them. And would chip in funding for any good FOSS projects that might seek to solve this problem.
I agree with you and it's an important distinction. But for me it's also about the ethos of the developers or company. Promoting free and open source tools is great, but requiring the opposite as a prerequisite to use the largest publicly facing implementation of that is a very odd decision.