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. According to the report, these services, which appear to be 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 individual users as a means of generating passive income from their cryptocurrency assets. However, these products are structured more like unsecured lending than traditional savings, and they lack the stability and safeguards of traditional banking.
The report notes that users of these platforms often relinquish control and ownership of their assets, which are then used for various activities such as lending, trading, and market-making strategies, with the returns paid to customers being a share of the profits generated. This arrangement is similar to traditional bank deposits but lacks the insurance and transparency associated with traditional finance. The report cites the collapse of Celsius Network and FTX as examples of the risks faced by users and the weaknesses that persist 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 illustration of how these dynamics can quickly spiral out of control.