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BIS Labels Major Crypto Exchanges ‘Shadow Banks’ in New Warning

The central bank forum warns that exchange yield products turn customer assets into unsecured loans that can fuel liquidation cascades.

Bis warns cryptocurrency exchanges are becoming ‘shadow banks,’ and why that's a risk
Crypto exchanges are morphing into ‘shadow banks,’ bis warns

Overview

  • - The BIS says big trading platforms now bundle lending, custody, and yield products in one place without bank-style safeguards or deposit insurance.
  • - The report explains that “earn” and savings offers reuse customer coins for margin lending or proprietary trades, leaving users as unsecured creditors if the platform fails.
  • - Citing past blowups at Celsius and FTX, the BIS notes that mixed customer funds and weak risk segregation led customers to face long, uncertain recoveries with no backstop.
  • - The BIS points to October 2025, when over $19 billion in leveraged positions were auto-liquidated in about a day, as proof that high leverage and robot-like margin engines can trigger fast, sweeping losses.
  • - The watchdog warns that failures at these multi-function exchanges could ripple into traditional finance through ties to stablecoin issuers and banks, and it urges coordinated global rules to curb those risks.