I am also wonder why some of the exchangers really needs ID's and the proof of residency where it is digital money where we cant understand why they keep on getting our ID's but for what right?
It's not that the exchanges themselves are behind all this. It's the government forcing exchanges to abide by the KYC and AML policies, and some other things, and in most cases, depending on the verification levels, you have to verify yourself with ID and stuff to unlock all functionalities of an exchange. The lower tier verification levels just need textual information (i.e name, address, phone number, etc). But of course, lower tier verification directly means less functionalities and lower withdrawal limits.
So, instead of verifying something I do trade also in some exchanges that are not going to give ID's because it is not only curiousness but it's also hassle since you need to verify it with selfies and wait for a bout 3-4 days or sometimes waiting is just a week.
Most exchanges that at this point still aren't forcing people to verify themselves, depending on where they are based, are not operating legally, and especially when they are accepting fiat deposits and withdrawals. If they also aren't licensed to function as money transmitter, they are yet again not operating legally, where this is even a more severe offence. It's like a ticking time bomb where it's just a matter of time before the FBI or whatever agency raids that entire exchange.
