Meaning you won't be able to put your KYC bitcoin thru LN (as a liquidity provider for example) and use the resulting non-whitelisted UTXOs?
I really don't know. Governments can stop businesses more easily than they can stop lightning nodes. So, maybe, sats can bounce around the lightning network and occasionally go on-chain, but those utxos won't be able to be redeemed for fiat.
But then people would be more incentivized to stay and spend in Bitcoin, further building the Bitcoin economy. It also weeds out people just in it for speculative gains.
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