The Bank for International Settlements has issued a report expressing concerns over cryptocurrency exchanges offering banking-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated entities.
The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, offering bundled services that would typically be separated across banks, brokers, and exchanges. The primary concern is the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income from their crypto assets.
However, these products often resemble unsecured lending more than savings and lack the stability and safeguards of traditional banking. Users of crypto exchanges often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies, with returns paid to customers as a share of the profits generated. These arrangements lack the transparency and insurance 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 in the industry, highlighting the dangers of a system built on leverage, opacity, and unprotected deposit-like promises.
The report also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, demonstrating how quickly these dynamics can spiral out of control.