The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banking, such as lending and yield products, but without the same level of protection. According to the report, these services, often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The crypto industry's largest players have evolved into multifaceted intermediaries, bundling services that would typically be separated across different financial institutions.
The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income, is a major concern. These products are structured more like unsecured lending than savings, and their attractive returns come with significant risks. Users who invest in these products often relinquish control and sometimes ownership of their assets to the platform, which then uses the funds for various activities, with the returns paid to customers being a share of the profits generated.
Unlike traditional banking, these arrangements lack insurance and may lack transparency regarding the use of assets. 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 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 example of how quickly these risks can materialize.