The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services similar to those of traditional banks, including lending and yield products, but without providing the same level of protection to users. According to the report, these services, which appear to be high-yield savings products, are in fact unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, combining services that are typically separate in traditional finance. The rapid growth of 'earn' and yield products, which are widely marketed to individual users as a means of generating passive income from their crypto assets, is a significant concern.
These products often promise attractive returns but are structured more like unsecured lending than savings. Essentially, these platforms accept deposits and invest them in high-risk activities without the stability guarantees of traditional banking. Users often relinquish control and sometimes ownership of their digital assets to the platform, which then utilizes the funds for various strategies. The returns paid to customers are a share of the profits generated from these activities, similar to bank deposits but without the insurance and transparency of traditional finance.
The report highlights the risks users face, citing the collapse of Celsius Network and FTX as examples of the weaknesses prevalent in the industry. It also references the flash crash of October 2025, which led to an estimated $19 billion in forced liquidations across crypto derivatives markets, demonstrating how quickly these issues can escalate.