The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services similar to those of traditional banks, including lending and yield products, but without the corresponding protection. This shift has led to the emergence of 'multifunction cryptoasset intermediaries' that combine services typically provided by separate entities such as banks, brokers, and exchanges. The report expresses concern over the rapid growth of 'earn' and yield products, which are often marketed to individual users as a means to generate passive income from their crypto assets. However, these products are structured more like unsecured loans than savings accounts, and their attractive returns come with significant risks.
By taking deposits and reinvesting them in high-risk activities without adequate safeguards, these platforms expose users to potential losses. Unlike traditional banking, these arrangements lack transparency and insurance, leaving users vulnerable to the platform's financial stability. The report cites the collapse of major platforms as evidence of the weaknesses inherent in the current system, emphasizing the need for greater awareness and protection for users.