The bright side of this is full protection of the customer (funds and personal data).
at least on this point I have to agree with you, if people can do KYC right at the time of site registration, it will avoid things like when a player earns a lot of money the site starts to create arguments like: multiple accounts do not let the customer who won too much money don't get your money
But the downside is delivering very sensitive documents to an anonymous site where the owners are anonymous.
Well, the cryptocurrency community has always been a very private community when it comes to KYC, do you have any idea if your site is getting a lot of support from people who play using cyptocurrencies?
Bettors are more and more restricted (depending on their location of course) when it comes to payment methods available, they like to use cryptocurrencies, not necessarily as a way to be anonymous but simply because it is a convenient way to deposit and withdraw. They actually don't mind to have a balance in fiat currency.