The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services akin to traditional banking, including lending and yield products, but without the same level of protection for users. This shift has led to the creation of 'multifunction cryptoasset intermediaries' that combine services typically provided by separate entities such as 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 to generate passive income from their crypto assets.
However, these products are structured more like unsecured loans than savings accounts and pose significant risks due to the lack of safeguards and transparency. Users may relinquish control and ownership of their assets to the platform, which then utilizes these funds for various activities, with returns paid to customers being a share of the generated profits.
This arrangement is similar to traditional banking but lacks the insurance and stability provided by conventional financial institutions. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the exposure of users to platform solvency risks in the event of losses. The BIS also references the October 2025 flash crash, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, demonstrating how these risks can quickly escalate.