The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering banking services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services, which are often marketed as high-yield savings products, are in reality unsecured loans to lightly regulated 'shadow banks'. The report notes that the largest players in the crypto industry have evolved into multifunctional intermediaries, offering a range of services that would typically be separated across banks, brokers, and exchanges. The authors of the report express concern over the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a way to generate passive income on their crypto assets.
However, these products often carry high risks, similar to unsecured lending, and lack the stability and safeguards of traditional banking. The report warns that users of these platforms are exposed to the risk of the platform's insolvency, and that the lack of transparency and insurance can leave them vulnerable to significant losses. The collapse of Celsius Network and FTX are cited as examples of the weaknesses in the industry, which the report argues are still prevalent.
The report also highlights the potential for rapid destabilization in the crypto market, citing the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets.