The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing services similar to those of traditional banks, such as lending and yield products, but without offering the same level of protection to users. According to the report, these exchanges have evolved into complex financial intermediaries, combining services typically offered by separate entities like banks, brokers, and exchanges. The report highlights the rapid growth of 'earn' and yield products, which are often marketed to individual users as a means to generate passive income from their crypto assets.
However, these products are structured more like unsecured loans than savings accounts and carry significant risks. By using customer funds for lending, trading, and market-making activities, these platforms expose users to potential losses without the insurance and safeguards available in traditional banking.
The report cites the collapse of major platforms like Celsius Network and FTX as examples of the vulnerabilities in the system, emphasizing the need for greater transparency and protection 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 a demonstration of how quickly these risks can escalate.