Crypto exchanges are evolving into entities that function like banks but without the regulatory protections or deposit insurance that traditional financial institutions provide, according to a report released Thursday by the Bank for International Settlements (BIS).

The BIS found that stablecoin yields and DeFi “earn” products offered by exchanges are effectively unsecured loans to lightly regulated intermediaries, not savings products. “What looks like a high-yield savings product is, in reality, an unsecured loan to a lightly regulated shadow bank,” the report said.

The 38-page paper noted that crypto exchange users often relinquish control – and sometimes ownership – of their digital assets to the platform, which then…