A recent report by the Bank for International Settlements highlights the growing trend of cryptocurrency exchanges offering bank-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. The report notes that 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, offering a range of services that would typically be separated across banks, brokers, and exchanges. The rapid growth of 'earn' and yield products is a major concern, as they are widely marketed to retail users as a means of generating passive income on their crypto assets, despite being structured more like unsecured lending than savings.
These platforms take deposits and invest them in risky activities without the safeguards that make traditional banking stable. Users often relinquish control and ownership of their assets to the platform, which uses the funds for various strategies, with customers receiving a share of the profits. However, these arrangements lack the insurance and transparency of traditional finance, leaving users exposed to the platform's solvency in the event of losses.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the risks of a system built on leverage, opacity, and unsecured promises. The flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations, further underscores the potential for rapid destabilization in crypto markets.