The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly 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, what appears to be a high-yield savings product is actually an unsecured loan to a lightly regulated entity.
The crypto industry's major players have evolved into multifaceted intermediaries, combining services that are typically separated across banks, brokers, and exchanges. The report highlights the rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income from crypto assets. However, these products are structured more like unsecured lending than savings and lack the stability of traditional banking.
Users of crypto exchanges often relinquish control and ownership of their digital assets to the platform, which then uses the funds for various activities, with the returns paid to customers being a share of the generated profits. The report notes that these arrangements are similar to bank deposits but lack insurance and transparency.
The BIS cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, which expose users to significant risks. The report also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid destabilization.