The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. According to the report, these exchanges have evolved into complex financial institutions, offering a range of services that were previously provided 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 retail users 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 users may be exposed to significant risks. 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 returns paid to customers as a share of the profits generated.
This arrangement is similar to traditional banking, but lacks the insurance and safeguards that are typically in place to protect users. The report cites the collapse of Celsius Network and FTX as examples of the risks posed by these unregulated 'shadow banks', and warns that users are exposed to significant risks in the event of losses. The report also highlights the lack of transparency in how assets are used and the potential for rapid losses, as seen in the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets.