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, these services are essentially unsecured loans to lightly regulated entities. The crypto industry's major players have evolved into multifaceted intermediaries, combining services typically provided by separate entities like 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 often relinquish control and ownership of their digital assets to the platform, which then uses the funds for various activities, with returns paid to customers being a share of the generated profits.
This arrangement is similar to traditional bank deposits but lacks insurance and transparency. The report cites the collapse of Celsius Network and FTX as examples of the risks faced by users, emphasizing that the system is built on leverage, opacity, and unsecured promises. The BIS also references the 2025 flash crash, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid destabilization.