Let's assume that (1) KYC as-is is broken and a security risk due to potential data leakage and (2) dropping ID checks altogether is a nonstarter.

What's the solution?

zk.me works well. Totally eliminates the data at rest attack surface. The client side production of snarks means the onus of responsiblity lies on the user to not have their devices compromised tho...

Also the SBT is static. So reproofing must occur for KYC compliance checks.

I'm using their service in my app for sybil resistance and to detect and expel fraudsters. Very grateful they exist.