The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering banking-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services, which appear to be high-yield savings products, are in reality unsecured loans to lightly regulated entities.
The report notes that the largest players in the crypto industry have evolved into multifaceted intermediaries, offering a range of services that would typically be separated across banks, brokers, and exchanges. The rapid growth of 'earn' and yield products, which are widely marketed to retail users as a means of generating passive income on crypto assets, is a major concern. While these products often promise attractive returns, their structure is more akin to unsecured lending than traditional savings.
The report warns that these platforms are effectively taking deposits and using them for risky activities without the necessary safeguards, leaving users exposed to the platform's solvency in the event of losses. The lack of transparency and insurance in these arrangements is also a significant concern. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the need for greater protection and regulation. 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 an illustration of how quickly these dynamics can escalate.