The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering 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 include high-yield savings products, are essentially unsecured loans to lightly regulated entities.
The report highlights the rapid growth of 'earn' and yield products, which are often marketed to retail users as a way to generate passive income from their cryptocurrency assets. However, these products are structured more like unsecured lending than savings and 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. The returns paid to customers are a share of the profits generated from these activities, but the arrangements lack transparency and the insurance offered by traditional finance.
The Bank for International Settlements cites the collapse of Celsius Network and FTX as examples of the risks faced by users of these platforms, which are built on leverage, opacity, and deposit-like promises without protection. The report 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 quickly these dynamics can spiral out of control.