The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. This is according to a recent report that highlights the risks associated with these unsecured loan products, which are often marketed as high-yield savings options but lack the stability and safeguards of traditional banking. The report notes that the largest crypto industry participants have evolved into multifaceted intermediaries, offering a range of services that would typically be separate across different financial institutions. A key concern is 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, but are structured more like unsecured lending than savings.
These platforms essentially take deposits and reinvest them into high-risk activities without the stability mechanisms found in traditional banking. Users often relinquish control and sometimes ownership of their digital assets to the platform, which uses the funds for lending, trading, or market-making strategies, with returns paid to customers being a share of the profits. However, these arrangements lack the insurance and transparency of traditional finance, leaving users exposed to the platform's solvency in the event of losses.
The report cites the examples of Celsius Network and FTX to illustrate the risks users face due to the weaknesses prevalent in the industry. It also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an example of how these dynamics can quickly spiral out of control.