The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services akin to traditional banking, including lending and yield products, but without the same level of protection for users. According to the report, these services, which appear to be high-yield savings products, are actually unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, combining services typically offered by separate entities such as banks, brokers, and exchanges.
A primary concern is the rapid growth of 'earn' and yield products, which are widely marketed to individual users as a means of generating passive income from crypto assets. While these products promise attractive returns, they are structured more like unsecured lending than savings.
The report notes that these platforms take deposits and reinvest them into high-risk activities without the stability safeguards found in traditional banking. Users often relinquish control and ownership of their digital assets to the platform, which then utilizes the funds for various strategies, with returns paid to customers being a share of the generated profits. These arrangements lack the insurance and transparency provided by traditional finance, leaving users exposed to the platform's financial stability in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses within the industry, highlighting how a system built on leverage and opacity, without protection, can quickly unravel.
The flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, is also referenced as an example of how these dynamics can rapidly escalate.