The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services similar to those of traditional banks, including lending and yield products, but without the same level of protection. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated entities. The report highlights the evolution of the crypto industry's major players into multifaceted intermediaries that bundle services typically provided by separate entities such as banks, brokers, and exchanges.
The primary concern is 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 often resemble unsecured lending more closely than savings, and their structure poses significant risks.
The report notes that these platforms effectively accept deposits and reinvest them in high-risk activities without the stability guarantees of 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 such as lending, trading, or market-making.
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 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 prevalent in the industry. The BIS also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, as a demonstration of how quickly these dynamics can escalate.