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. According to the report, these exchanges have evolved into complex financial institutions, providing a range of services that would typically be offered by separate entities such as banks, brokers, and exchanges.
The report expresses concern over the rapid growth of 'earn' and yield products, which are often marketed to individual investors as a way to generate passive income from their cryptocurrency assets. However, these products are often structured more like unsecured loans than savings accounts, and they lack the stability and safeguards of traditional banking. The report notes that users of these platforms often relinquish control of their assets, which are then used for lending, trading, or market-making activities, with the returns paid to customers being a share of the profits generated.
This arrangement is similar to a bank deposit, but without the insurance and transparency offered by traditional finance. The report warns that users are exposed to the risk of the platform's insolvency in the event of losses, citing the collapse of Celsius Network and FTX as examples of the weaknesses in the industry. The BIS also points to 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 risks can escalate.