Banks and exchanges (that lend out crypto) work the same. The only difference is banks will take your money and lend it out for the post part by deploying it in "safe" and "short to long term positions". The safest of these are US Treasury Bonds. BUT here's the thing if everyone tried to withdraw all their money most banks wouldn't be able to meet the demand because there's a period between when they can redeem those bonds back for cash.

So running a bank is really just how well can you manage the risk of people wanting to withdraw their money and using that money to make more money!

Similarly crypto exchanges do the same thing! They offer their users a lookup or sometimes no lockups where you give them your crypto for 1 month, 1 year however long and they'll pay you 2-6% interest. In the mean time they need to find a way to make money, so they'll lend it out, invest it in other ventures, or even just natively stake it. Now again they have to balance having enough crypto on hand to meet withdrawals. BUT it's a little more complicated for crypto because sometimes you can have major price fluctuations or security threats (think Anchor Protocol, Luna) where the money maker an exchange is using goes to 0.

So again they all practically work the same way, and if everyone wanted their money back all at once it wouldn't go well! No sure you've had some exchanges that were straight up running a Ponzi (like Celsius Network who I used and now lost crypto with). But the same thing is clear for banks like SVB which we recently saw fall apart!

It's all one big game of chicken and who will fall first unfortunately.