BIS warns DeFi 'earn' services are effectively unsecured loans

The Bank for International Settlements (BIS) has warned that while cryptocurrency exchanges offer bank-like services such as loans and interest-bearing products, they lack the safeguards of traditional finance, CoinDesk reported. In a report, the BIS stated that stablecoin interest products and DeFi "earn" services are structured much like unsecured loans. It cautioned that these offerings, while appearing to be high-yield products, actually represent credit exposure to under-regulated shadow banking. The report highlighted that customer funds are often used for high-risk investments without adequate mechanisms to ensure stability, warning that investors could be forced to bear losses directly if a platform encounters problems.