The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the same level of protection. According to the report, these services, which are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The report expresses concern over 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.
However, these products are structured more like unsecured lending than savings and lack the stability and safeguards of traditional banking. The report warns 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, with the returns paid to customers being a share of the generated profits. This arrangement is similar to traditional bank deposits but lacks the insurance and transparency offered by conventional finance.
The report cites the collapse of Celsius Network and FTX as examples of the risks posed to users by these weaknesses in the industry. The BIS 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 escalate.