The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing financial services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated entities. The crypto industry's major players have transformed into multifaceted intermediaries, offering a range of services that would typically be separated across different financial institutions.
The rapid growth of 'earn' and yield products, which are widely marketed to individual users as a means of generating passive income from their crypto assets, is a significant concern. These products often promise attractive returns but are structured more like unsecured lending than savings, and they lack the safeguards that make traditional banking stable. When users deposit their digital assets onto these platforms, they may relinquish control and even ownership, allowing the platform to use the funds for various activities such as lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but these arrangements lack the insurance and transparency of traditional finance.
The report highlights the risks users face, citing the collapse of Celsius Network and FTX as examples of the weaknesses 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, demonstrating how quickly these dynamics can escalate.