The Bank for International Settlements has issued a report highlighting the growing trend of cryptocurrency exchanges offering services akin to traditional banking, such as lending and yield products, but without the protective measures found in conventional financial institutions. According to the report, what appears to be a high-yield savings option is, in reality, an unsecured loan to a lightly regulated entity. The crypto industry's major players have evolved into multifaceted intermediaries, combining services that are typically separated across banks, brokers, and exchanges.
The primary concern is the rapid growth of 'earn' and yield products, which are widely marketed to retail users as tools for generating passive income from their crypto assets. While these offerings often promise attractive returns, their structure is more akin to unsecured lending than savings. The report notes that these platforms essentially take deposits and reinvest them into risky activities without the stability-enhancing safeguards found in traditional banking.
In many cases, users relinquish control and sometimes ownership of their digital assets to the platform, which then utilizes the funds for lending, trading, or market-making strategies. The returns paid to customers are a share of the profits generated from these activities, similar to bank deposits but lacking the insurance 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 industry's weaknesses. The BIS also references the flash crash of October 2025, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, as a demonstration of how quickly these dynamics can spiral out of control.