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. According to the report, these exchanges have evolved into complex financial institutions, offering a range of services that were previously separate. The primary concern is the rapid growth of 'earn' and yield products, which are often marketed to individual users as a means of generating passive income from their crypto assets. However, these products are more akin to unsecured loans than savings accounts, and their structure poses significant risks.
Users who participate in these schemes often relinquish control of their assets, which are then used by the platform for various activities, with the returns paid to customers being a share of the profits generated. Unlike traditional banking, these arrangements lack the necessary insurance and may also lack transparency regarding the use of assets. The report highlights the collapse of Celsius Network and FTX as examples of the risks faced by users, citing the lack of protection and the systemic weaknesses that still pervade the industry. The BIS also references the flash crash of October 2025, which led to an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how these dynamics can quickly escalate.