Cryptocurrency exchanges are increasingly offering bank-like services such as loans and yield products, but without the protections offered by traditional financial institutions, according to a report released Thursday by the Bank for International Settlements (BIS).
“What appear to be high-yield savings products are actually unsecured loans to poorly regulated shadow banks,” the report said, and does not necessarily reflect the views of the BIS, an international financial institution backed by the world’s 63 central banks.
The 38-page report also noted that the largest participants in the cryptocurrency industry are evolving beyond simple trading platforms into what it describes as “multifunctional crypto asset intermediaries” that bundle services typically separated between banks, brokers, and exchanges.
The authors said their biggest concern is how fast “yield” and high-yield products are growing, which are widely sold to retail users as tools to generate passive income with crypto assets. Although these products often promise attractive returns, they are structured more like unsecured loans than savings, the report said.
“These platforms effectively take deposits and recycle them into risky activities, but there are no safeguards to stabilize traditional banking operations.”
Users of crypto exchanges often relinquish control, and sometimes ownership, of their digital assets to the platform, which then uses the funds for lending, trading, or market-making strategies. The profits paid to customers are part of the profits earned from these activities.
These arrangements are similar to bank deposits, but lack the insurance that traditional finance provides. There may also be a lack of transparency about how assets are used.
“From the customer’s perspective, these products are generally unsecured claims against the intermediary,” the report said, warning that users are exposed to the platform’s solvency if they incur losses.
BIS cited the collapse of Celsius Networks and FTX as examples of how users are at risk and victims of weaknesses that remain prevalent within the industry.
“What Celsius and FTX revealed was not just sloppy management, but a system built on promises like leverage, opacity, and unprotected deposits,” the report said.
Citing the October 2025 flash crash that caused an estimated $19 billion in forced liquidations across the crypto derivatives market, the report said the slide highlights how quickly these dynamics can spiral.
