The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. According to the report, these exchanges have evolved into complex financial institutions, offering a range of services that were previously provided by separate entities such as banks, brokers, and exchanges.
The report highlights the rapid growth of 'earn' and yield products, which are often marketed to retail users as a way to generate passive income from their cryptocurrency assets. However, these products are often structured more like unsecured loans than savings accounts, and they lack the safeguards and insurance that are typically provided by traditional financial institutions.
As a result, users are exposed to significant risks, including the potential loss of their assets in the event of the platform's insolvency. The report cites the collapse of companies such as Celsius Network and FTX as examples of the dangers of this unregulated industry.
The authors of the report argue that these platforms are essentially taking on deposits and using them to engage in risky activities, without providing users with the same level of transparency and protection that they would receive from a traditional bank.