The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to traditional banks, including lending and yield products, but without the same level of protection for users. This shift has led to the creation of 'multifunction cryptoasset intermediaries' that bundle services typically offered by separate entities, such as 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 of generating passive income from their crypto assets, but in reality, function more like unsecured loans. These platforms take deposits and invest them in high-risk activities without the stability and safeguards of traditional banking, leaving users exposed to significant risks, including the loss of control and ownership of their assets.
The lack of transparency and insurance in these arrangements is a major concern, and the report cites the collapse of Celsius Network and FTX as examples of the potential consequences. The BIS also references the 2025 flash crash, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as a demonstration of how quickly these risks can escalate.