The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banking, such as lending and yield products, but without the same level of protection for users. The report notes that these exchanges have evolved into complex financial intermediaries, providing a range of services that would typically be separated across different financial institutions. A key concern is the rapid growth of 'earn' and yield products, which are often marketed to individual investors as a way to generate passive income from their cryptocurrency assets.
However, these products are structured more like unsecured loans than traditional savings products, and they lack the safeguards and insurance that are typical of traditional banking. The report warns that users of these platforms are exposed to significant risks, including the potential loss of their assets in the event of the platform's insolvency. The collapse of Celsius Network and FTX are cited as examples of the risks posed by these unregulated 'shadow banks'. The report also highlights the lack of transparency and oversight in the industry, which can lead to a lack of accountability and a heightened risk of financial instability.