The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly adopting bank-like services, including lending and yield products, but without providing the same level of protection as traditional financial institutions. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated 'shadow banks.' The report highlights the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from their crypto assets, but notes that their structure is more akin to unsecured lending than traditional savings.
The authors of the report express concern over the lack of safeguards and transparency in these arrangements, which can leave users exposed to significant risks, including the platform's solvency in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses present in the industry, and warns that users are vulnerable to these risks due to the lack of protection and transparency in these products.