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 services, which appear to be high-yield savings products, are actually unsecured loans to lightly regulated entities.
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 these products are more akin to unsecured lending than traditional savings. The biggest concern is that these platforms are taking deposits and using them for high-risk activities without the necessary safeguards, leaving users exposed to the platform's solvency in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the risks posed by these weaknesses in the industry.