Crypto framed as shadow banking alternative

Crypto is increasingly being described less as a new kind of money and more as a parallel financial system built outside banks. In April 2026, the Bank for International Settlements said the largest platforms now do much more than match buyers and sellers. (bis.org) The BIS paper calls them “multifunction cryptoasset intermediaries,” or platforms that bundle exchange trading, custody, lending, derivatives, and token issuance in one place. That is closer to a broker, a bank, and a prime lender under one roof than to a simple marketplace. (bis.org) That is where the “shadow banking” comparison comes from. Shadow banking usually means credit, liquidity, and maturity transformation happening outside the insured banking system and outside the full set of bank rules. (fsb.org) (bis.org) The BIS said some crypto “earn” products work like short-term redeemable claims that are economically similar to deposits. Customers hand over assets to a platform, and the platform can use them for lending, market-making, or other activities. (bis.org) The difference is the safety net. The BIS said many of these firms operate without deposit insurance, without central bank liquidity backstops, and often without the disclosure standards expected of traditional intermediaries. (bis.org) Decentralized finance, or DeFi, pushes the same idea further. In DeFi, software code on blockchains can handle lending, trading, and collateral calls without a bank branch, a clearinghouse, or a loan officer. (bis.org) BIS researchers wrote in 2025 that crypto and DeFi aim to replicate many of the economic functions of traditional finance. Their point was not that the functions are new, but that the same old risks can show up in new wrappers. (bis.org) Stablecoins are a big reason the banking comparison has sharpened. They are crypto tokens designed to hold a steady value, usually against the U.S. dollar, and they are widely used as the cash leg for trading and settlement on crypto markets. (imf.org) (bis.org) Their scale now reaches beyond crypto trading screens. A BIS working paper said dollar-backed stablecoins held more than $200 billion in assets as of March 2025 and bought about $40 billion of U.S. Treasury bills in 2024. (bis.org) That paper found stablecoin inflows can move short-term Treasury yields, lowering three-month bill rates by 2.5 to 3.5 basis points, with larger effects when bills are scarce. That is the kind of footprint regulators usually watch in mainstream funding markets, not fringe payment experiments. (bis.org) Regulators have been trying to close that gap with a simple rule: same activity, same risk, same regulation. The Financial Stability Board used that phrase in its 2023 global framework for crypto and stablecoins, and repeated in 2025 that implementation still varies widely across countries. (fsb.org 1) (fsb.org 2) That leaves the core argument in the thread looking less like a hot take and more like the direction of official policy thinking. Crypto still sells speed, global reach, and peer-to-peer access, but the more it performs banking functions, the harder it is to argue it should avoid banking rules. (bis.org) (fsb.org)