The Bank for International Settlements (BIS) has warned that cryptocurrency exchanges are increasingly operating like “shadow banks,” offering services that resemble traditional banking but without comparable safeguards, according to a recent report.

The BIS said many crypto exchanges now provide lending and yield-generating products that function similarly to bank deposits, yet lack protections such as deposit insurance and prudential oversight.

These platforms are effectively

• taking in customer assets,
• promising returns, and then
• deploying those funds into lending, trading, or other activities

exposing users to credit, liquidity and maturity risks typically associated with banking.

A key concern highlighted in the report is…