The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering banking services such as lending and yield products, but without the protection and security offered by traditional financial institutions. The report notes that these exchanges have evolved into multifaceted platforms, offering a range of services that were previously separated across banks, brokers, and exchanges. A key concern is the rapid growth of 'earn' and yield products, which are often marketed to retail users as a means of generating passive income on their crypto assets, but in reality, are more akin to unsecured lending. These platforms take deposits and use them for risky activities, but without the safeguards and stability of traditional banking.
Users often relinquish control and ownership of their digital assets to the platform, which then uses the funds for lending, trading, or market-making strategies. The report warns that users are exposed to the platform's solvency in the event of losses and cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry.
The BIS also points to the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, as a demonstration of how quickly these dynamics can spiral out of control.