BIS dey warn say Crypto Earn na unsecured lending, dem call di exchange model na "shadow banking"

BIS dey warn say big crypto exchanges dey turn to “Multifunction Crypto-asset Intermediaries” (MCIs), wey bundle trading, custody, brokerage, and proprietary trading. BIS talk say these structures dey weak traditional risk firewalls because dem no get proper asset segregation, transparency, and reserve buffers—e resemble “shadow banking.” BIS also yarn say most crypto Earn or “high-yield” products no be true yield. When users deposit crypto for returns, platforms normally treat the assets as unsecured loans and rehypothecate dem into riskier activities like margin lending, leveraged proprietary trading, and liquidity provision. If insolvency happen, users fit become unsecured creditors wey dey for back of repayment queue, with no deposit insurance or lender-of-last-resort support. To show fragility, BIS mention FTX collapse and Celsius Network failure. Dem still talk about one 24-hour forced-liquidation episode wey total liquidations reach about $19B during sharp market value drop. BIS report also highlight DeFi contagion risk, including the KelpDAO attack: exploited rsETH been use as collateral to borrow heavily from Aave, contribute to estimated ~$292M shortfall. For traders, na signal of counterparty and insolvency risk for crypto Earn yields. Under stress, leverage and interconnected flows fit speed up drawdowns and liquidity gaps, especially when few dominant platforms concentrate market depth.