Crypto exchanges are increasingly offering bank-like services such as lending and yield products, but without the protections provided by traditional financial institutions, according to a report issued 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 from around the world.
The 38-page report also noted that the crypto industry’s biggest participants have evolved beyond simple trading platforms into what it described as “multifunction cryptoactive intermediaries,” bundling services that would typically be separate across banks, brokers and exchanges.
The authors said the main concern is how fast “earn” and dividend products are growing and that they are 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 said.
“These platforms effectively take deposits and recycle them for risky activities – but without the safeguards that make traditional banking stable.”
In many cases, crypto exchange users relinquish 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 return paid to customers is a share of the profits from these activities.
Although these schemes are similar to bank deposits, they lack the traditional insurance offerings. There may also be a lack of transparency about how the assets are used.
“From the customer’s perspective, these products are generally an unsecured claim on the intermediary,” said the report, which warns that users are exposed to the platform’s solvency in the event of a loss.
The BIS pointed to the collapse of Celsius Network and FTX as examples of how users are being exposed and victims of the weaknesses it says are still prevalent in the industry.
“What was exposed at Celsius and FTX was not just mismanagement, it was a system built on leverage, opacity and deposit-like promises without protection,” the report said.
Citing the October 2025 flash crash, which triggered an estimated $19 billion in forced liquidations across crypto derivatives markets, the report said the slide highlighted how quickly this dynamic can spiral.
