The Bank for International Settlements has released a report highlighting the risks associated with cryptocurrency exchanges that offer bank-like services, including lending and yield products, without providing the same level of protection as traditional financial institutions. According to the report, these services are essentially unsecured loans to lightly regulated entities. The crypto industry's largest players 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, widely marketed to retail users as a means to generate passive income, is a major concern. These products often promise attractive returns but are structured more like unsecured lending than savings.
As a result, users are exposed to significant risks, including the platform's solvency in the event of losses. The report cites the collapse of Celsius Network and FTX as examples of the weaknesses in the industry, highlighting the need for greater transparency and regulation. The lack of insurance and safeguards in these arrangements leaves users vulnerable to losses, and the report warns that the dynamics of these markets can quickly spiral out of control, as seen in the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets.