The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing banking-like services, including lending and yield products, without offering the same level of protection as traditional financial institutions. According to the report, these services are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have transformed into multifaceted intermediaries, offering a range of services that typically would be separated among banks, brokers, and exchanges. The report highlights the rapid growth of 'earn' and yield products, which are often marketed to retail users as a means to generate passive income from their crypto assets.
However, these products are structured more like unsecured lending than savings, and they lack the stability and safeguards of traditional banking. Users of these platforms often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but they lack the transparency and insurance 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, as an example of how quickly these dynamics can spiral out of control.