The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to traditional banking, such as lending and yield products, but without the same level of protection for users. According to the report, these services are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, offering a range of services that typically would be separated across banks, brokers, and exchanges.
The report highlights the rapid growth of 'earn' and yield products as a significant concern, as they are widely marketed to individual users as a means to generate passive income from their crypto assets. However, these products are structured more like unsecured lending than savings and often come with attractive returns.
The platforms effectively take deposits and use them for risky activities without the stability safeguards found in traditional banking. In many cases, users relinquish control and ownership of their digital assets to the platform, which then utilizes the funds for various strategies.
The returns paid to customers are a share of the profits generated from these activities, similar to bank deposits but lacking the insurance offered by traditional finance. The report warns that users are exposed to the platform's solvency in the event of losses, citing the collapse of Celsius Network and FTX as examples of the weaknesses within the industry. The BIS also references the flash crash of October 2025, which led to an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting how quickly these dynamics can spiral out of control.