Cryptocurrency exchanges are increasingly offering bank-like services such as loans and yield products but without the protection offered by traditional financial institutions, according to a report released by the Bank for International Settlements (BIS) on Thursday.
“What appear to be high-yielding savings products are actually unsecured loans to lightly regulated shadow banks,” the report said. The report does not necessarily reflect the views of the Bank for International Settlements, an international financial institution owned by 63 central banks around the world.
The 38-page report also noted that the crypto industry’s largest players have evolved from simple trading platforms to so-called “multifunctional crypto-asset intermediaries,” bundling together services that are typically separate across banks, brokers, and exchanges.
The biggest concern, the authors say, is how quickly “yield” and yield products are growing and they are widely marketed to retail users as tools to generate passive income from their crypto assets. While these products often promise substantial returns, their structures are closer to unsecured loans than savings, the report said.
“These platforms effectively take deposits and recycle them into risky activities, but lack the safeguards that keep traditional banking stable.”
In many cases, cryptocurrency exchange users give control and sometimes ownership of their digital assets to the platform, which then uses those funds for lending, trading, or market-making strategies. The rewards paid to clients are a share of the profits generated by these activities.
While these arrangements are similar to bank deposits, they lack the insurance provided by traditional finance. There may also be a lack of transparency into how assets are used.
“From the customer’s perspective, these products are typically unsecured claims against intermediaries,” the report said, warning that users would face consequences for the platform’s solvency should losses occur.
The BIS pointed to the collapse of Celsius Network and FTX as examples of how users were exposed and fell victim to weaknesses it said remain widespread within the industry.
“The problem with Celsius and FTX is not just mismanagement, but a system built on leverage, opacity and deposit-like promises without protections,” the report said.
The report cited the October 2025 flash crash, which triggered forced liquidations of an estimated $19 billion across the crypto derivatives market, and said the slide highlighted the spiraling speed of these dynamics.
