The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing banking services, including lending and yield products, without offering 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 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 crypto assets, but are structured more like unsecured lending than savings.
The biggest concern is that these platforms are taking deposits and using them for risky activities without the necessary safeguards, leaving users exposed to significant risks. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, emphasizing that the lack of transparency and regulation in the crypto market poses significant risks to users.