The Bank for International Settlements has issued a report highlighting that cryptocurrency exchanges are increasingly offering services similar to those of banks, including lending and yield products, but without the protections that traditional financial institutions provide. According to the report, what appears to be a high-yield savings product is actually an unsecured loan to a lightly regulated entity. The report notes that the largest players in the crypto industry have evolved beyond simple trading platforms into multifaceted intermediaries, bundling services that are typically separated across banks, brokers, and exchanges.
The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income from crypto assets, is a significant concern. These products often promise attractive returns but are structured more like unsecured lending than savings. The report warns that these platforms are effectively taking deposits and using them for risky activities without the safeguards that make traditional banking stable. In many cases, users relinquish control and sometimes ownership of their digital assets to the platform, which then uses the funds for lending, trading, or market-making strategies, with the returns paid to customers being a share of the profits generated from these activities.
However, these arrangements lack the insurance offered by traditional finance and may lack transparency regarding how the assets are used. The report cautions that users are exposed to the platform's solvency in the event of losses, citing the collapse of Celsius Network and FTX as examples of the weaknesses within the industry. The BIS 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 these dynamics can quickly spiral out of control.