The Bank for International Settlements has released a report 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 are essentially unsecured loans to lightly regulated entities. The crypto industry's largest players have evolved into multifaceted intermediaries, providing a range of services that would typically be separated across banks, brokers, and exchanges. The report's authors express 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 crypto assets.
However, these products are structured more like unsecured lending than savings and lack the stability of traditional banking. Users of these platforms often relinquish control and ownership of their assets, which are then used for lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but the arrangements lack the insurance and transparency of traditional finance.
The report cites the collapse of Celsius Network and FTX as examples of the risks faced by users and the weaknesses that still exist within the industry. The BIS also references the October 2025 flash crash, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for these dynamics to spiral out of control quickly.