A report released by the Bank for International Settlements warns that cryptocurrency exchanges are increasingly offering services similar to those of banks, including lending and yield products, but without the same level of protection. The report states that these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated 'shadow banks.' The crypto industry's largest players have evolved into multifunctional intermediaries, offering 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 widely marketed to retail users as a means of generating passive income on their crypto assets.
However, these products often promise attractive returns but are structured more like unsecured lending than savings. The report notes that these platforms effectively take deposits and recycle them into risky activities without the safeguards that make traditional banking stable.
In many cases, users relinquish control and ownership of their digital assets to the platform, which uses the funds for lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but these arrangements lack the insurance and transparency offered by traditional finance. The report warns 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 in 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, highlighting how quickly these dynamics can spiral.