The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering banking-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated 'shadow banks'. The report notes that the largest players in the crypto industry have evolved into multifunctional crypto-asset intermediaries, offering a range of services that would typically be separated across banks, brokers, and exchanges.
The rapid growth of 'earn' and yield products is a major concern, as they are widely marketed to retail users as a means of generating passive income on their crypto assets, but their structure is more akin to unsecured lending than traditional savings. The report warns that these platforms are essentially taking deposits and using them for risky activities without the necessary safeguards, leaving customers exposed to the platform's solvency in the event of losses. The lack of transparency and insurance in these arrangements is also a significant concern.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the risks posed to users by these unregulated 'shadow banks'. 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.