The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services resembling those of traditional banks, such as lending and yield products, but without the corresponding protections. 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 report notes that the largest participants in the crypto industry have evolved into multifaceted intermediaries, providing a range of services that would typically be separated across banks, brokers, and exchanges.
The authors express concern over the rapid growth of 'earn' and yield products, which are widely marketed to retail users as tools for generating passive income on crypto assets. However, these products often promise attractive returns but are structured more like unsecured lending than savings. The report warns that these platforms effectively 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 then uses the funds for lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, which are similar to bank deposits but lack the insurance offered by traditional finance. The report highlights the lack of transparency in how assets are used and warns that users are exposed to the platform's solvency in the event of losses. The Bank for International Settlements cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, stating that the system is built on leverage, opacity, and deposit-like promises without protection.
The report 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.