BIS Flags Crypto Exchanges as Shadow Banks After $300 M Kelp DAO Hack

Regulators are sounding the alarm as crypto platforms take on bank‑like functions without the safety nets that protect traditional depositors. The Bank for International Settlements said exchanges now offer lending and yield products that work like deposits but lack insurance and prudential oversight. This model exposes users to credit, liquidity and maturity risks similar to those in the shadow banking sector.

Bitcoin (BTC) traded at $27,400, down 1.8% in the past 24 hours, while Ethereum (ETH) stood at $1,850, up 0.9%. The total crypto market cap was $1.2 trillion, down 2.1% week‑over‑week, compared with global banking assets of roughly $130 trillion. Such scale shows how even a modest crypto shock can ripple through leveraged positions.

The BIS noted many exchanges accept customer assets, promise returns, and then deploy those funds into lending, trading or other activities. Unlike bank depositors, users have no deposit insurance if a platform fails. The Kelp DAO liquid restaking protocol was compromised, resulting in a loss of approximately $300 million, illustrating how yield products can become unsecured loans to users.

These mechanics raise concerns about systemic risk, especially when high leverage, opaque balance sheets and collateral reuse are involved. Market participants should watch for regulatory responses, including potential updates to the EU’s MiCA framework and any BIS‑led consultation on crypto‑banking activities. Exchange‑linked tokens such as Binance Coin (BNB) and Coinbase (COIN) may see heightened volatility as policymakers weigh tighter oversight.