Cryptocurrency exchanges are increasingly offering bank-like services, such as loans and yield products, but without the protection that traditional financial institutions offer, according to a report released Thursday by the Bank for International Settlements (BIS).
“What looks like a high-yield savings product is actually an unsecured loan to a lightly regulated shadow bank,” said the report, which does not necessarily reflect the views of the BIS, an international financial institution owned by 63 central banks around the world.
The 38-page report also notes that the crypto industry’s biggest players have evolved beyond simple trading platforms to become what it describes as “multi-functional cryptoasset intermediaries,” bringing together services that would typically be separated between banks, brokers and exchanges.
The authors said the biggest concern is how quickly “earn” and yield products are growing, and that they are being widely marketed to retail users as tools to generate passive income on their crypto assets. Although these offers often promise attractive returns, their structure is closer to unsecured loans than savings, the report says.
“These platforms effectively accept deposits and recycle them into risky activities, but without the guarantees that ensure the stability of traditional banks.”
In many cases, users of crypto exchanges cede control and, sometimes even ownership, of their digital assets to the platform, which then uses the funds for lending, trading, or market-making strategies. The returns paid to customers constitute a part of the profits generated by these activities.
Although these schemes are similar to bank deposits, they do not benefit from traditional financial insurance. There may also be a lack of transparency about how assets are used.
“From the customer’s perspective, these products generally constitute an unsecured claim on the intermediary,” the report said, warning that in the event of losses, users are exposed to the solvency of the platform.
The BIS cited the collapse of Celsius Network and FTX as examples of how users are being exposed and victimized by weaknesses that it says are still endemic within the sector.
“What revealed itself at Celsius and FTX was not just mismanagement, it was a system built on leverage, opacity, and unprotected deposit-style promises,” the report said.
The report cited the flash crash of October 2025, which triggered around $19 billion in forced liquidations in crypto derivatives markets, saying the slide highlighted how quickly this dynamic can fester.
