The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly providing financial services similar to those of traditional banks, but without the necessary protections for users. This includes lending and yield products that are essentially unsecured loans to lightly regulated entities. The report highlights the rapid growth of 'earn' and yield products, which are often marketed as a means for retail users to generate passive income from their crypto assets. However, these products resemble unsecured lending more than traditional savings and lack the stability and insurance of conventional banking.
Users of these platforms often surrender control and ownership of their digital assets, which are then used for various activities such as lending, trading, and market-making, with the returns paid to customers being a share of the profits. This arrangement is similar to bank deposits but without the accompanying insurance and transparency.
The report cites the collapse of companies like Celsius Network and FTX as examples of the risks posed to users, emphasizing that the weaknesses in the industry are still prevalent. 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 these dynamics can quickly spiral out of control.