The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services similar to those of traditional banks, such as lending and yield products, but without the same level of protection. According to the report, these services, including stablecoin yields and other DeFi 'earn' products, are essentially unsecured loans to lightly regulated entities. The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, providing a range of services that would typically be separated across different financial institutions. The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from crypto assets, is a major concern.
These products often promise attractive returns but are structured more like unsecured lending than savings, and they lack the safeguards that make traditional banking stable. 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.
However, these arrangements lack the insurance and transparency offered by traditional finance, leaving users exposed to the platform's solvency in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting how users are exposed to significant risks.
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 illustration of how quickly these dynamics can spiral out of control.