BIS Warns of Rising Risks in Crypto ‘Yield’ Products

A new BIS report warns that crypto yield products act as unsecured loans, highlighting systemic risks seen in the collapses of FTX and Celsius.

A new report from the Bank for International Settlements (BIS) has shed light on the growing risks facing investors in the digital asset space.

From Exchanges to ‘Multi-function Intermediaries’

The report highlights that leading crypto companies are no longer just trading platforms. They have transformed into so-called “multi-function crypto intermediaries” that combine activities usually separated between banks, brokers, and exchanges.

This concentration of functions creates additional risks, particularly regarding the management of client funds. Products offering “yield” are marketed as a way to earn passive income, but in reality, they function as unsecured lending to the platform itself.

Yield Without Protection

According to the BIS analysis, what appears to be a high-yield savings account is, in practice, a loan to a poorly regulated institution. Clients often relinquish control over their assets—and sometimes even ownership of them—while the platform uses those funds for various activities, including lending, trading, or other ventures.

In exchange, investors receive a portion of the generated profit. The problem is that, unlike bank deposits, these funds are not protected by guarantee funds or strict regulations.

“From the customer’s perspective, this is an unsecured claim against the intermediary,” the report states, emphasizing the risk of total loss during liquidity crises or bankruptcy.

Lessons from Celsius and FTX

The report points to the collapse of Celsius Network and FTX as key examples of systemic weaknesses within the industry. In both cases, customers were exposed to significant losses due to a lack of transparency and excessive leverage.

According to the BIS, the issue is not just poor management, but the model itself—a combination of high debt, limited transparency, and promises of yield without any real protection.

Systemic Risk and Volatility

The report also draws attention to events such as the sharp decline in October 2025, when approximately $19 billion in positions were liquidated across crypto derivative markets. This underscores how quickly such structures can destabilize during a market shock.

The rapid growth of yield-bearing products, combined with the lack of clarity regarding how funds are utilized, increases the risk of a “domino effect” during periods of stress.

Growing Pressure for Regulation

The BIS conclusion is clear: the industry is moving toward a model that mimics the banking system but lacks its protective mechanisms. This shift will likely lead to increased regulatory pressure on a global scale.

For investors, this means a need for more careful risk assessment—especially regarding products that promise high returns in an environment with limited transparency.

Ultimately, the report highlights one central question: how sustainable is the “yield without protection” model in an increasingly interconnected financial world.