The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. According to the report, these services, which appear to be high-yield savings products, are in fact unsecured loans to lightly regulated entities.
The report highlights the evolution of the crypto industry's major players into multifaceted intermediaries that offer a range of services typically provided by separate entities such as banks, brokers, and exchanges. The rapid growth of 'earn' and yield products, which are often marketed to retail users as a means of generating passive income from their crypto assets, is a significant concern.
These products, while promising attractive returns, are structured more like unsecured loans than savings products. The report notes that these platforms effectively take deposits and invest them in high-risk activities without the stability-enhancing safeguards found in traditional banking. In many cases, users relinquish control and even ownership of their digital assets to the platform, which then uses these funds for various strategies such as lending, trading, or market-making, with the returns paid to customers being a share of the profits generated.
This arrangement is similar to traditional bank deposits but lacks the insurance and transparency provided by conventional finance. The report warns that users are exposed to the platform's solvency in the event of losses, citing the collapses of Celsius Network and FTX as examples of the weaknesses prevalent in the industry. The BIS also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how quickly these dynamics can escalate.