The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the corresponding protections. According to the report, these services, which appear to be high-yield savings products, are in fact unsecured loans to lightly regulated entities.
The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, offering a range of services that would typically be provided by separate entities such as banks, brokers, and exchanges. The rapid growth of 'earn' and yield products is a major concern, as these products are widely marketed to retail users as a means of generating passive income from their crypto assets, despite being structured more like unsecured lending than savings.
The report warns that these platforms are engaging in risky activities without the necessary safeguards, effectively taking deposits and recycling them into high-risk ventures. Users often relinquish control and ownership of their digital assets to the platform, which then utilizes 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 and transparency offered by traditional finance, leaving users exposed to the platform's solvency in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses prevalent in the industry, highlighting how users are exposed to significant risks.
The BIS also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how quickly these dynamics can escalate.