Cryptocurrency Exchanges Evolving Into 'Shadow Banks' Amid Regulatory Concerns

The Bank for International Settlements (BIS) has sounded a warning about the growing trend of cryptocurrency exchanges providing banking-like lending services.

According to a recent research paper, these exchanges are offering products such as 'wealth management' and 'yield generation,' which pool user assets into high-risk activities. This creates unsecured claims on users' assets and exposes them directly to the platform's solvency risk.

The BIS report highlights the collapse cases of Celsius Network and FTX, as well as the flash crash event in October 2025, which demonstrated the potential for systemic risks due to high leverage, opacity, and lack of protective mechanisms.