Agree that this is is not great, but it's not nearly as bad as you make it seem.
Google is not limiting the apps available on alternative OSs. They are limiting what apps are available on stock OSs.
If anything, this makes an alternative OS more useful relative to stock, not less.
The negative here is that some devs may stop developing given the alternatives of KYCing or losing the distribution the Play Store offers.
Even that is probably exaggerated. Most will KYC. Ride or dies will abandon the Play Store.
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The bigger issue seems to be that people are forced more into picking one or the other. Some people have a mixed setup. I think @Ava is in that camp. I'm all the way into the GrapheneOS end with no Google services and that's fine for me, but not for most people. So they either have stock Google and none of the cool shit (assuming you may be wrong about the KYC part) or have to completely dive into the deep end like me and give up some of the stuff they used. And even though Graphene has sandboxed Play store and services, I can confirm that some applications have never functioned properly on my wife's phone after switching, even though they worked fine on stock.
I'm sure there are other issues I'm missing. I think I've had banking apps refuse to work even with google services (some integrity check, I can't remember, switched banks). I don't use the NFC payment stuff, so not sure how it works, but it would be a problem for many people if it didn't.
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