The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banking, such as lending and yield products, but without the corresponding protections. According to the report, these services, which include 'earn' and yield products, are essentially unsecured loans to lightly regulated entities.
The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, providing a range of services that would typically be separated across banks, brokers, and exchanges. The primary concern is 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.
However, these products are structured more like unsecured lending than savings, and they lack the stability and safeguards of traditional banking. The report warns that users who invest in these products are exposed to the risk of the platform's insolvency, and they may not have control over or even ownership of their digital assets. The report cites the collapse of Celsius Network and FTX as examples of the risks associated with these unregulated 'shadow banks.' It also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid destabilization in the industry.