The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services similar to those of traditional banks, 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 that resemble shadow banks.
The report expresses concern over the rapid growth of these products, which are often marketed to retail users as a means of generating passive income from their crypto assets. However, the structure of these products is more akin to unsecured lending than traditional savings, and they lack the stability and safeguards that are typically associated with traditional banking. The report notes 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, with the returns paid to customers being a share of the profits generated from these activities.
The lack of transparency and insurance in these arrangements poses a significant risk to users, who are 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 weaknesses in the industry and the potential consequences for users.
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 quickly these risks can materialize.