We aren't fans of it either, but this is a legal requirement for offering a custodial wallet service. You can use your self-custodial wallet with Primal android and web apps via Nostr Wallet Connect.
Discussion
Also, I have been under the impression that the KYC requirement was more related to having the ability to buy Bitcoin in small amounts with fiat directly through the wallet, rather than simply due to the wallet being custodial. After all, there are plenty of custodial wallets out there that do no KYC.