A report released by the Bank for International Settlements highlights the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the corresponding safeguards and insurance. The report notes that these services, which are increasingly popular, are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, combining services that are typically separated across banks, brokers, and exchanges.
The rapid growth of 'earn' and yield products, which are widely marketed as tools for generating passive income on crypto assets, is a significant concern. These products, while promising attractive returns, are structured more like unsecured lending than savings, and their marketing to retail users is particularly alarming.
The report warns that these platforms are engaging in risky activities without the stability and safeguards of traditional banking, and that users are exposed to the platform's solvency in the event of losses. The lack of transparency and insurance in these arrangements is also highlighted, with users often relinquishing control and ownership of their digital assets to the platform.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, emphasizing that the system is built on leverage, opacity, and deposit-like promises without protection. The flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, is also referenced as an illustration of how these dynamics can quickly spiral out of control.