The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing banking services, including lending and yield products, without the same level of protection as traditional financial institutions. According to the report, these exchanges have evolved into complex entities that combine the functions of banks, brokers, and exchanges, offering services that allow users to generate passive income on their crypto assets. However, these products are often structured as unsecured loans rather than savings products, and users may be exposed to significant risks, including the loss of control and ownership of their assets.
The report highlights the lack of transparency and oversight in the industry, citing the collapse of Celsius Network and FTX as examples of the potential consequences. It also notes that the rapid growth of 'earn' and yield products has created a system that is vulnerable to collapse, with users facing significant risks due to the lack of insurance and safeguards.