The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the same level of protection for users. According to the report, these services, which include 'earn' and yield products, are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have transformed into 'multifunction cryptoasset intermediaries', providing a range of services that would typically be separate in traditional finance. The report expresses concern over 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.
However, these products are structured more like unsecured lending than savings and lack the stability of traditional banking. Users of these platforms often relinquish control and ownership of their digital assets, which are then used for various activities such as lending, trading, and market-making.
The returns paid to customers are a share of the profits from these activities, but these arrangements lack the insurance and transparency of traditional finance. The report warns that users are exposed to the platform's solvency in the event of losses and cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry. The report also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid destabilization.