According to a report released by the Bank for International Settlements (BIS) on Thursday, cryptocurrency exchanges are increasingly offering services akin to those of traditional banks, such as lending and yield products. However, these do not come with the usual protections provided by conventional financial institutions.
The 38-page BIS report describes how major players in the crypto industry have evolved from mere trading platforms into ‘multifunction cryptoasset intermediaries,’ offering a range of services typically dispersed among banks, brokers, and exchanges. The report points out that what appear to be high-yield savings products are often unsecured loans made to lightly regulated shadow banks.
A significant concern highlighted by the authors is the rapid growth of “earn” and yield products, which are heavily marketed to retail users as means of generating passive income from their crypto assets. Despite offering appealing returns, these products function more like unsecured lending than traditional savings accounts, according to the report.
These platforms essentially collect deposits and use them for high-risk activities without the safety mechanisms inherent in traditional banking systems. Users often surrender control and sometimes ownership of their digital assets to these platforms, which then leverage these funds for lending, trading, or market-making strategies. The returns paid out are typically a portion of the profits from such activities.
Unlike bank deposits, these arrangements do not come with insurance protections found in traditional finance, raising transparency issues regarding asset usage. As noted in the report, customers essentially hold an unsecured claim against these intermediaries, leaving them vulnerable to the platform’s financial stability should losses occur.
The BIS cited the collapses of Celsius Network and FTX as examples demonstrating user exposure due to systemic weaknesses within the industry. The report suggests that failures at these entities were not just managerial missteps but were rooted in systems built on leverage, opacity, and unsecured deposit-like promises without adequate protection.
Additionally, the report references the October 2025 flash crash, which led to an estimated $19 billion in forced liquidations within crypto derivatives markets. This incident underscores how swiftly such financial dynamics can deteriorate.