The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services akin to traditional banking, including lending and yield products, but without the necessary protections. According to the report, what appears to be a high-yield savings option is, in reality, an unsecured loan to a lightly regulated entity. The crypto industry's major players have evolved into multifaceted intermediaries, offering a range of services that typically would be separated among banks, brokers, and exchanges.
The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income on their crypto assets, poses significant concerns. These products often promise attractive returns but are structured more like unsecured lending than savings.
The report notes that these platforms effectively accept deposits and reinvest them in high-risk activities without the stability safeguards found in traditional banking. In many cases, users relinquish control and ownership of their digital assets to the platform, which then utilizes the funds for various strategies, with customers receiving a share of the generated profits. However, these arrangements lack the insurance and transparency offered by 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 vulnerabilities within the industry, highlighting the risks associated with a system built on leverage, opacity, and unprotected deposit-like promises.
The BIS also references the October 2025 flash crash, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how quickly these dynamics can escalate.