The Bank for International Settlements has issued a report highlighting the risks associated with cryptocurrency exchanges offering bank-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services, which are growing rapidly and are widely marketed to retail users as a means of generating passive income, are essentially unsecured loans to lightly regulated entities.
The report expresses concern over the lack of transparency and safeguards in these arrangements, which can expose users to significant risks in the event of losses. The collapse of Celsius Network and FTX is cited as examples of the weaknesses in the industry. The report emphasizes that these platforms are taking on deposits and engaging in risky activities without the stability and insurance of traditional banking, leaving users vulnerable to the platform's solvency.