The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering 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 are often marketed as high-yield savings products, are actually unsecured loans to lightly regulated entities.
The report highlights the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from their crypto assets. However, these products are often structured more like unsecured lending than savings, and they lack the safeguards that make traditional banking stable. The report notes that users of these platforms often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies, with the returns paid to customers being a share of the profits generated from these activities. This arrangement is similar to traditional bank deposits but lacks the insurance and transparency that traditional finance provides.
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 BIS also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, as an example of how quickly these dynamics can spiral out of control.