The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing financial services similar to those of traditional banks, including lending and yield products, but without the same level of protection for users. According to the report, these services, which include 'earn' and yield products, are essentially unsecured loans to lightly regulated entities, akin to shadow banks.
The BIS report highlights the rapid growth of these products, which are often marketed to retail users as a means of generating passive income from their crypto assets, but notes that they lack the stability and safeguards of traditional banking. This is due to the fact that these platforms take deposits and use them for risky activities without the necessary safeguards, leaving users exposed to potential losses.
The report cites the examples of Celsius Network and FTX, which collapsed and left users vulnerable, as evidence of the weaknesses in the current system. It also references the flash crash of October 2025, which resulted in significant forced liquidations across crypto derivatives markets, as an illustration of how quickly these risks can materialize.