The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services akin to traditional banking, such as lending and yield products, but without the corresponding protections. This shift has led to the emergence of 'multifunction cryptoasset intermediaries' that bundle services typically offered by separate entities like banks, brokers, and exchanges. A key concern highlighted in the report is the rapid growth of 'earn' and yield products, which are often marketed to individual users as a means to generate passive income from their crypto assets. However, these products are structured more like unsecured loans than savings accounts, posing significant risks due to their lack of transparency and regulatory oversight.
Unlike traditional banking, these platforms do not offer insurance, and users may relinquish control or even ownership of their assets, exposing them to the platform's financial stability. The report cites the collapse of Celsius Network and FTX as examples of the vulnerabilities within the industry, emphasizing that the failures were not just a result of poor management but also of a system built on leverage and opacity without adequate protection for users. The flash crash of October 2025, which led to an estimated $19 billion in forced liquidations across crypto derivatives markets, is also referenced as an example of how these dynamics can rapidly escalate.