The Bank for International Settlements has released a report highlighting the growing concern of cryptocurrency exchanges offering services akin to traditional banking, but without the necessary protections. These exchanges are increasingly providing lending and yield products, but they lack the security and insurance that conventional financial institutions offer. According to the report, what appears to be a high-yield savings product is, in reality, an unsecured loan to a lightly regulated entity.
The crypto industry's largest players have evolved into multifaceted intermediaries, bundling services that are typically separate in traditional finance. The rapid growth of 'earn' and yield products is a major concern, as they are widely marketed to retail users as a means to generate passive income from their crypto assets.
However, these products are often structured more like unsecured lending than savings, and they expose users to significant risks. The report notes that these platforms take deposits and recycle them into risky activities without the safeguards that make traditional banking stable.
In many cases, users relinquish control and ownership of their digital assets to the platform, which uses the funds for various strategies. The returns paid to customers are a share of the profits generated 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, citing 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 a demonstration of how quickly these dynamics can spiral out of control.