The Bank for International Settlements has released a report highlighting the growing trend of cryptocurrency exchanges offering services similar to traditional banking, such as lending and yield products, but without the same level of protection. According to the report, these services, which include 'earn' and yield products, are essentially unsecured loans to lightly regulated entities.
The crypto industry's largest players have evolved into multifunctional intermediaries, offering a range of services that would typically be separated across banks, brokers, and exchanges. The report expresses concern over the rapid growth of these products, which are often marketed to retail users as a means of generating passive income on their crypto assets. However, these products are structured more like unsecured lending than savings, and they lack the safeguards that make traditional banking stable. Users of these platforms often relinquish control and ownership of their digital assets, which are then used for lending, trading, or market-making strategies.
The returns paid to customers are a share of the profits generated from these activities, but these arrangements lack the insurance and transparency offered by traditional finance. The report warns that users are exposed to the platform's solvency in the event of losses, citing the collapse of Celsius Network and FTX as examples of the weaknesses in the industry.
The report also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, highlighting the potential for rapid instability in these markets.