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 corresponding protections. This shift has led to the emergence of 'multifunction cryptoasset intermediaries' that bundle services typically separated across 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.
However, these products are structured more like unsecured loans than savings instruments, lacking the stability and safeguards of traditional banking. Users who invest in these products relinquish control and sometimes ownership of their digital assets to the platform, which then utilizes the funds for various activities such as 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 provided 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 within the industry. The BIS also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an illustration of how these dynamics can rapidly escalate.