The Bank for International Settlements has issued a warning that cryptocurrency exchanges are increasingly offering services akin to traditional banking, such as lending and yield products, but without the corresponding protections. This shift has led to the emergence of 'multifunction cryptoasset intermediaries' that bundle services typically separated across banks, brokers, and exchanges. The report highlights the rapid growth of 'earn' and yield products, which are often marketed to retail users as a means to generate passive income from crypto assets. However, these products function more like unsecured loans than savings accounts, and their structure poses significant risks.
By taking deposits and redirecting them into high-risk activities without adequate safeguards, these platforms expose users to potential losses. Unlike traditional banking, these arrangements lack transparency and insurance, leaving users vulnerable to the platform's solvency.
The report cites the collapse of Celsius Network and FTX as examples of the weaknesses prevalent in the industry, emphasizing that the risks associated with these platforms can have severe consequences. The BIS also references the October 2025 flash crash, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as a testament to the potential for rapid destabilization in the market.