The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services similar to those of traditional banks, including lending and yield products, but without the same level of protection. According to the report, these exchanges are essentially operating as 'shadow banks,' providing bank-like services without the necessary insurance or safeguards. The report highlights the rapid growth of 'earn' and yield products, which are often marketed to retail users as a means of generating passive income from their crypto assets.
However, these products are structured more like unsecured loans than savings accounts, posing a significant risk to users. The report notes that users who invest in these products are exposed to the platform's solvency and may face significant losses in the event of a collapse, as seen in the cases of Celsius Network and FTX.
The BIS warns that the lack of transparency and regulation in the crypto industry, combined with the blurring of lines between banking and cryptocurrency, poses a significant risk to users and the financial system as a whole.