KYC definitely won't happen. But that aside the funny thing is, HyperLiquid isn't actually decentralized in a traditional sense. They have like 5 validating nodes and all operated by HyperLiquid affiliates.

Also the XYZ markets that the stock tokens "live on" is not managed by HyperLiquid as far as I know.

I would say this is slightly wrong. For one, they are up to 27 validating nodes. The limited nodes is to get their .2s settlement time and also to prevent frontrunning or MEV attacks, as they implement an actual CLOB. HyperLiquid is also non-custodial, you keep USDC in a self-owned wallet on the Arbitrum network. The funds do not move until your transaction on HyperLiquid settles.