The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the corresponding protections. This shift has led to the emergence of 'multifunction cryptoasset intermediaries,' where services typically separated across banks, brokers, and exchanges are now bundled together. The report expresses concern over the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means to generate passive income from their crypto assets.
However, these products often resemble unsecured lending rather than savings, and their structure poses significant risks. Unlike traditional banking, these platforms lack insurance and safeguards, leaving users 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 prevalent in the industry, emphasizing that the failures were not merely a result of poor management but a systemic issue stemming from leverage, opacity, and unprotected deposit-like promises.
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 a demonstration of how these dynamics can rapidly escalate.