The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing 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 are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated entities. The report expresses concern over the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from their crypto assets. However, these products are structured more like unsecured lending than savings and lack the stability and safeguards of traditional banking.
The report highlights that users of these platforms often relinquish control and ownership of their digital assets, which are then used for various activities such as lending, trading, and market-making strategies. The returns paid to customers are a share of the profits generated from these activities, but these arrangements lack the insurance and transparency of traditional finance. The report cites the collapse of Celsius Network and FTX as examples of the risks faced by users and warns that the weaknesses in the industry are still prevalent. It also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how these dynamics can quickly spiral out of control.