The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banks, such as 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 in fact unsecured loans to lightly regulated 'shadow banks'.
The report notes that the largest players in the crypto industry have evolved beyond simple trading platforms to become 'multifunction cryptoasset intermediaries', offering a range of services that would typically be separated across different financial institutions. The rapid growth of 'earn' and yield products is a major concern, as they are widely marketed to retail users as a way to generate passive income on their crypto assets, but often lack the transparency and safeguards of traditional banking. The report warns that users of these platforms are exposed to significant risks, including the lack of insurance and the potential for platforms to use their assets for risky activities without their knowledge or consent. The collapse of Celsius Network and FTX are cited as examples of the dangers of this lack of transparency and protection.
The report concludes that the crypto industry's shift towards bank-like services poses significant risks to users and highlights the need for greater regulation and oversight.