The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to 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 separated among 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 assets.
However, these products are structured more like unsecured loans than savings accounts, and users are exposed to significant risk. The report notes that users often relinquish control of their assets to the platform, which then uses the funds for various activities, and the returns paid to customers are a share of the profits generated. This arrangement is similar to traditional banking, but lacks the same level of insurance and transparency. The Bank for International Settlements cites the collapse of Celsius Network and FTX as examples of the risks faced by users, and warns that the industry is still vulnerable to similar failures.
The report also references the flash crash of October 2025, which highlighted the potential for rapid and significant losses in the cryptocurrency market.