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 corresponding protections. According to the report, these services are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, providing a range of services that would typically be separated across banks, brokers, and exchanges. The report expresses concern over 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. Users of these platforms often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies. 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 report warns that users are exposed to the platform's solvency in the event of losses, citing the collapse of Celsius Network and FTX as examples of the weaknesses in the industry. The BIS also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid instability in these dynamics.