I don’t disagree with the merchant adoption, and my wife and I want to offer Bitcoin payments for our businesses. But if people start from KYC, it’s still all tracked even with mass merchant adoption.
Discussion
Just like the USD is not fully private. Dollar bills probably fairly safe, but even $20 bills can be tracked if the merchants deposit into ATM. It takes flowing through several hands without touching an ATM to start to become clean.
I believe that if bitcoin is in self-custody (and routed through Lightning payments too) and never touches fiat rails then the users are completely outside the traditional system. And so while there is an original point of KYC, beyond that tracking the journey of bitcoin from one transaction to the next becomes increasingly fuzzy.
That said, it is still the obligation of those transacting to track everything for (onerous) tax reporting. But looking to the future if there is enough bitcoin payment adoption one hopes that bitcoin capital gains will become a thing of the past.