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 for users. According to the report, these services, which are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The report highlights the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from their crypto assets.
However, these products are often structured more like unsecured lending than savings, and they lack the safeguards that make traditional banking stable. The report notes that users who participate in these schemes often relinquish control and even ownership of their digital assets to the platform, which then uses the funds for various activities such as lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities. The report warns that these arrangements are similar to bank deposits but lack the insurance and transparency offered by traditional finance.
The BIS cites the collapse of Celsius Network and FTX as examples of the risks posed to users by these weaknesses in the industry. 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.