The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services similar to traditional banking, such as lending and yield products, without providing the same level of protection. According to the report, these services, which are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The report highlights the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from their crypto assets.
However, these products are structured more like unsecured lending than savings and lack the safeguards that make traditional banking stable. The report notes that users of these platforms often relinquish control and ownership of their digital assets, which are then used for various activities such as lending, trading, and market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but the arrangements lack the transparency and insurance offered by traditional finance.
The report cites the collapse of Celsius Network and FTX as examples of the risks posed to users by these unregulated entities, and warns that the weaknesses in the industry are still prevalent. The report 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.