Cryptocurrency exchanges increasingly offer bank-like services, such as loans and yield products, but without the protection provided by traditional financial institutions, according to a report published Thursday by the Bank for International Settlements (BIS).
“What appears to be a high-yield savings product is in reality an unsecured loan to a lightly regulated shadow bank,” says 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 noted that the largest players in the crypto industry have evolved beyond simple trading platforms into what it described as “multi-function cryptoasset intermediaries,” which bundle services that would normally be separated between banks, brokers and exchanges.
The authors said the biggest concern is how quickly “earnings” and yield products are growing, and that they are widely marketed to retail users as tools to generate passive income on their crypto assets. While these offerings often promise attractive returns, their structure is closer to unsecured loans than savings, according to the report.
“These platforms effectively accept deposits and recycle them into risky activities, but without the safeguards that make traditional banking stable.”
In many cases, cryptocurrency exchange users give up control, and sometimes even ownership, of their digital assets to the platform, which then uses the funds for lending, trading, or market-making strategies. Rebates paid to customers are a portion of the profits generated by these activities.
While these arrangements are similar to bank deposits, they lack the insurance that traditional finance offers. There may also be a lack of transparency about how assets are used.
“From the customer’s perspective, these products are generally unsecured credit against the intermediary,” the report notes, warning that users are exposed to the platform’s solvency in the event of losses.
The BIS pointed to the collapse of Celsius Network and FTX as examples of how users are exposed to and fall victim to weaknesses it says are still widespread in the industry.
“What fell apart at Celsius and FTX was not just mismanagement, but a system based on leverage, opacity, and unprotected deposit-like promises,” the report says.
The report cited the October 2025 flash crash, which triggered approximately $19 billion in forced liquidations in crypto derivatives markets, and said the crash highlighted how quickly these dynamics can spiral.
