The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banking, such as lending and yield products, but without the same level of protection. According to the report, these services, which include 'earn' and yield products, are essentially unsecured loans to lightly regulated entities.
The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, offering a range of services that would typically be provided by separate entities such as banks, brokers, and exchanges. The rapid growth of 'earn' and yield products is a major concern, as they are often marketed to retail users as a means of generating passive income on their crypto assets, but in reality, they are more akin to unsecured lending. The report warns that these platforms are taking on deposits and using them for risky activities without the necessary safeguards, leaving users exposed to the platform's solvency in the event of losses.
The lack of transparency and insurance in these arrangements is also a significant concern. The report cites the collapse of Celsius Network and FTX as examples of the risks posed to users by these weaknesses in the industry. The BIS also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an example of how quickly these dynamics can spiral out of control.