According to a report released by the Bank for International Settlements, cryptocurrency exchanges are increasingly providing services akin to traditional banking, including lending and yield products, but without the same level of protection for users. The report highlights that what appears to be a high-yield savings option is, in fact, an unsecured loan to a lightly regulated entity. The crypto industry's major players have evolved into multifaceted intermediaries, offering a range of services that typically would be separated among banks, brokers, and exchanges.
A key concern is the rapid growth of 'earn' and yield products, which are often marketed to retail users as a means to generate passive income from their crypto assets, but are structured more like unsecured lending than savings. These platforms essentially take deposits and reinvest them into risky activities without the stability safeguards found in traditional banking.
Users often relinquish control and sometimes ownership of their digital assets to the platform, which then utilizes these funds for various strategies, with the returns paid to customers being a share of the generated profits. However, these arrangements lack the insurance and transparency of traditional finance, leaving users exposed to the platform's solvency in the event of losses.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses within the industry, highlighting how users are exposed to significant risks. It also references the flash crash of October 2025, which led to an estimated $19 billion in forced liquidations across crypto derivatives markets, demonstrating how these dynamics can quickly escalate.