Instead of consolidating smaller UTXOs from KYC exchange sources, why not just reuse an address for transfers from the same KYC source? You end up with a single larger UTXO, and no privacy is lost since each transfer is identically doxxed anyway.
I'm more interested in redemptions - cash or in-kind. Cash redemption allows games to be played with naked shorts. In-kind redemption enforces the underlying scarcity.