BIS warns crypto exchanges mimic banks, lack safeguards
6.9 Regulation BIS warns crypto exchanges act as unregulated banks, offering risky lending and yield products without safeguards, exposing users to major financial risks and urging stricter oversight.
Recent reports from the Bank for International Settlements (BIS) highlight rising concerns about cryptocurrency exchanges transforming into multifunctional intermediaries. These platforms increasingly resemble traditional banks by offering lending and yield products, yet they typically lack critical safeguards such as deposit insurance, transparency, and robust risk management. The BIS warns that high-yield "earn" products, often promoted as passive income, are essentially unsecured loans to lightly regulated entities. This exposes users to significant credit and liquidity risks. The collapses of Celsius and FTX, along with the $19 billion liquidation event in October 2025, are cited as evidence of the systemic dangers these practices pose. In response, the BIS calls for urgent regulatory reforms. It advocates for a hybrid oversight framework that combines entity-based and activity-based supervision, including requirements for capital and liquidity buffers, to better protect consumers and the broader financial system.
