BIS warns 6 top crypto exchanges are shadow banks without safeguards

The Bank for International Settlements (BIS) warned in a new 38-page report that many of the world's largest crypto exchanges function as lightly regulated "shadow banks," offering deposit-like products to retail users without the consumer protections, insurance, or transparency required of traditional financial institutions.

"What looks like a high-yield savings product is, in reality, an unsecured loan to a lightly regulated shadow bank,” the report’s authors said. The paper, which does not necessarily reflect the official views of the BIS, names Binance, Bybit, Coinbase, Crypto.com, MEXC, and OKX as examples of these "multifunction cryptoasset intermediaries."

The report highlights the rapid growth of "earn" and yield-generating products that pool customer assets for lending, trading, and market-making. It argues these activities create significant risk, citing the collapses of Celsius Network and FTX as prime examples where users lost funds due to platform insolvency and a lack of segregation between customer and company assets.

The warning from the institution owned by 63 central banks amplifies global regulatory pressure on the crypto industry, potentially accelerating the push for comprehensive frameworks like Europe's MiCA. For investors, it underscores the solvency risk inherent in platforms where they relinquish control of their assets for a promised yield, a dynamic that contributed to the estimated $19 billion flash crash in October 2025.

Risk Transformation Without Rules

According to the BIS analysis, these crypto platforms are engaging in "risk transformation" by accepting customer assets and using them to fund speculative activities. This business model introduces novel forms of credit, liquidity, and maturity risks for which customers are not compensated. In many cases, users relinquish legal ownership of their digital assets to the platform, making their claim an unsecured one against the intermediary's balance sheet.

“These platforms are effectively taking deposits and recycling them into risky activities — but without the safeguards that make traditional banking stable," the report stated. This structure leaves users directly exposed to the platform’s solvency, a risk that became reality for customers of the collapsed FTX and Celsius Network platforms.

A Call for Global Coordination

The report's findings echo a growing chorus of international regulators calling for consistent oversight of the digital asset space. BIS General Manager Pablo Hernandez de Cos recently called for “critical” international cooperation on stablecoins, cautioning that fragmented rules could undermine financial integrity and create loopholes for cross-border misuse.

This sentiment is shared by industry participants who see a global framework as necessary for maturation. "Crypto, by its very nature, is a global asset class. No single country can regulate it effectively in isolation," CoinSwitch co-founder Ashish Singhal said in a recent interview with Firstpost. He noted that while jurisdictions like the US, UK, and Japan are developing domestic rules, a layered system with global coordination is needed for seamless cross-border interoperability, similar to how the SWIFT network functions for traditional finance.

This article is for informational purposes only and does not constitute investment advice.