The Bank for International Settlements has released a report highlighting the risks associated with cryptocurrency exchanges that offer bank-like services, including lending and yield products, without the protection afforded by traditional financial institutions. According to the report, these exchanges are evolving into multifunctional cryptoasset intermediaries, combining services typically offered by separate entities such as banks, brokers, and exchanges.
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, is a major concern. These products are structured more like unsecured loans than savings accounts, but without the stability and safeguards of traditional banking. Users of these platforms often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies, with the returns paid to customers being a share of the profits generated. However, these arrangements lack the transparency and insurance offered by traditional finance, leaving users exposed to the platform's solvency in the event of losses.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the risks associated with leverage, opacity, and deposit-like promises without protection. The flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, is also cited as an example of how quickly these dynamics can spiral out of control.