Why does protecting identity data require kernel-level access?

Short answer: Because the theft happens in the space between a program requesting credential data and the operating system delivering it. Only a defense operating at the kernel — below the applications and libraries an attacker can manipulate — can see that request, judge its intent, and stop it in time. 
 The three requirements 
 1. See the access as it happens. Identity theft isn't a file appearing on disk; it's a read. Tools scanning for malicious files see nothing, because in a modern infostealer nothing is written. The event to catch is the access attempt itself. 
 2. Decide fast enough. Automated tooling can infiltrate, collect, and self-delete within seconds. Any architecture that ships telemetry to a cloud service and waits for a verdict has already lost the race. The decision has to happen locally, in milliseconds. 
 3. Not depend on what the attacker controls. Security tools that rely on operating system libraries can be blinded when an attacker compromises those libraries in memory — the agent keeps running and reports nothing. Cyber Crucible was deliberately decoupled from Windows libraries so a compromised OS cannot silence it. 
 The consequence 
 Kernel-level operation is what allows all three at once: visibility into the access attempt, a sub-200-millisecond local decision, and independence from a potentially compromised operating system. 
 It's also why the protection works with no connectivity — air-gapped, offline, or at sea — since nothing has to leave the device for a decision to be made.