The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing financial 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 typically would be 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 individual investors as a way to generate passive income from their cryptocurrency holdings. However, these products are structured more like unsecured loans than traditional savings accounts, and they lack the stability and safeguards of traditional banking.
Users of these platforms often relinquish control of their assets, which are then used for various investment strategies, with the returns paid to customers being a share of the profits generated. This arrangement is similar to traditional bank deposits but lacks the insurance and transparency that comes with them. The report highlights the risks faced by users, citing the collapse of companies like Celsius Network and FTX as examples of the weaknesses in the industry.
It also references the flash crash of October 2025, which led to significant losses across cryptocurrency derivatives markets, as an illustration of how quickly these risks can materialize.