The Bank for International Settlements published a 38-page report on April 23, 2026, warning that the largest centralized crypto exchanges now function as "multifunction cryptoasset intermediaries" (MCIs) — entities that bundle trading, lending, custody, and yield services under one roof without ...
"What looks like a high-yield savings product is, in reality, an unsecured loan to a lightly regulated shadow bank." — Denise Garcia Ocampo, Peter Goodrich & Gian-Piero Lovicu, BIS/FSB, FSI Paper No. 27
The Bank for International Settlements published a 38-page report on April 23, 2026, warning that the largest centralized crypto exchanges now function as "multifunction cryptoasset intermediaries" (MCIs) — entities that bundle trading, lending, custody, and yield services under one roof without the prudential safeguards applied to banks performing equivalent functions. The paper, authored jointly by BIS and Financial Stability Board researchers, reviewed terms and conditions from eight major platforms between November 2025 and March 2026 and found that most earn products grant platforms full discretion over deposited assets, commingle client funds, and reserve the right to suspend redemptions without notice.
The findings land at a moment when the top five MCIs collectively serve 200–230 million users and process $6–8 trillion in quarterly spot and futures volume. Binance alone holds 39% of global centralized spot trading volume. The regulatory gap is stark: only 11 of 28 jurisdictions reviewed by the FSB have finalized frameworks addressing financial stability risks from crypto intermediaries. Just two cover borrowing and lending, and three address earn products.
The BIS report classifies seven platforms — Binance, Bybit, Coinbase, Crypto.com, Kraken, MEXC, and OKX — as multifunction cryptoasset intermediaries. The term is precise: these entities simultaneously operate as exchanges, custodians, lenders, market makers, and yield providers. In traditional finance, these activities are segmented across separately regulated entities — a broker-dealer does not also serve as the clearinghouse, the custodian, and the bank.
MCIs collapse these functions into a single counterparty. Users deposit assets. The platform trades them, lends them, deploys them into market-making strategies, and in some cases stakes or rehypothecates them — all while the user sees a balance on a screen. The BIS report states plainly: "From the customer's perspective, these products are generally an unsecured claim on the intermediary."
The combined user base of the platforms examined exceeds 200 million accounts. Binance's lifetime trading volume has surpassed $125 trillion. The scale of capital intermediated by these entities now rivals mid-tier banking systems — without capital requirements, liquidity buffers, stress testing protocols, deposit insurance, or central bank liquidity access.
The core finding of FSI Paper No. 27 centers on exchange-offered yield programs, marketed under names like "Earn," "Simple Earn," "Flexible Savings," and "Staking Rewards." The BIS reviewed terms and conditions from the seven named MCIs and found a consistent pattern:
Asset transfer. Users surrender ownership — not merely custody — of deposited tokens. Terms of service typically transfer title to the platform upon deposit.
Commingling. Customer funds are pooled with platform operating funds and other users' deposits. Segregation requirements that apply to bank deposits or brokerage accounts do not exist in most jurisdictions.
Discretionary deployment. Platforms retain "full discretion" over how deposited assets are used. Funds may be lent to institutional borrowers, deployed in market-making, or used to cover platform obligations. Users receive no disclosure about how their specific assets are utilized.
Redemption suspension. Terms universally reserve the right to halt withdrawals without notice. When Celsius froze withdrawals on June 12, 2022, earn depositors discovered they were general unsecured creditors in the resulting bankruptcy — behind secured lenders in the claims waterfall.
The BIS conclusion is direct: these are bank-like deposit products offered without bank-like protections. The yields advertised — often 4–12% APY on stablecoins — are funded by activities that carry credit, liquidity, and maturity risk. The user bears the downside but has no visibility into the risk being taken.
The report highlights a second structural vulnerability: leverage. Some MCIs allow retail customers margin of up to 150-to-1 on derivatives contracts. For context, FINRA limits retail margin in U.S. equities to 2-to-1 for overnight positions. The ratio in crypto derivatives on certain platforms is 75 times higher.
The consequences of this leverage concentration were visible on October 10, 2025, when a market sell-off triggered $19 billion in forced liquidations within 24 hours. Over $7 billion in liquidations occurred in a single hour. Binance experienced platform outages during the event. Three synthetic tokens — USDe, BNSOL, and WBETH — temporarily depegged, triggering cascading forced liquidations among users who held them as collateral in margin and futures accounts.
Binance subsequently paid $283 million in compensation to affected users, confirmed by chief customer service officer Yi He on October 11, 2025. According to Bloomberg reporting, the compensation covered users who suffered losses from depegging of synthetic tokens and system display glitches during the crash.
The BIS paper notes that "many intermediaries trade, lend, and custody assets for each other," creating an interconnected web where stress at one entity propagates to counterparties. The 2022 cascade — Celsius to Three Arrows Capital to FTX — remains the canonical example. The paper warns that as MCIs deepen connections to traditional finance through banking partnerships and stablecoin issuance relationships, the failure of a major MCI "could be significant for the broader cryptoasset ecosystem" and may become "a channel for spillovers into the traditional financial system."
The most striking data point in the BIS report is the regulatory coverage gap. The Financial Stability Board surveyed 28 jurisdictions in 2025 and found:
| Regulatory Metric | Coverage | |---|---| | Jurisdictions with finalized crypto frameworks | 11 of 28 (39%) | | Frameworks covering MCI borrowing/lending | 2 of 28 (7%) | | Frameworks covering earn products | 3 of 28 (11%) |
This means 89% of surveyed jurisdictions have no specific rules governing the earn products that the BIS identifies as the primary shadow-banking vector. Platforms operating in those jurisdictions face no legal obligation to segregate customer assets, maintain capital reserves, or disclose how deposited funds are deployed.
The EU's Markets in Crypto-Assets (MiCA) regulation, fully effective since December 2024, covers some of these gaps for European operations but does not mandate deposit insurance or match banking-grade capital requirements. The U.S. regulatory landscape remains fragmented, with the SEC, CFTC, and state regulators each claiming partial jurisdiction. The CLARITY Act, currently stalled in Congress, addresses stablecoin issuance but does not cover exchange lending or earn products.
The BIS report uses three case studies to illustrate the cost of the current regulatory vacuum:
Celsius Network (2022). Celsius operated a yield program offering up to 17% APY on crypto deposits. The platform experienced $1.4 billion in net withdrawals before freezing all withdrawals on June 12, 2022. It filed for bankruptcy on July 13, 2022. Earn depositors were classified as general unsecured creditors. The platform's deficit exceeded $1.2 billion.
FTX (2022). FTX commingled customer deposits with trading activities at affiliate Alameda Research. Customer losses exceeded $8 billion. The failure cascaded across the crypto ecosystem, taking down multiple counterparties with direct exposure to FTX or Alameda.
October 2025 flash crash. The most recent stress test produced $19 billion in forced liquidations and required Binance to pay $283 million in compensation. The event demonstrated that systemic risk in crypto derivatives markets has grown since 2022, not diminished.
In each case, the MCI structure — where a single entity controls trading, custody, lending, and leverage — amplified losses beyond what segregated operations would have produced.
The crypto industry's response to the BIS warning has been muted. No major exchange issued a public statement directly addressing the report's findings in the five days since publication. Industry lobby groups have previously argued that existing consumer protection and anti-fraud laws provide adequate safeguards, and that crypto-specific regulations risk driving activity to unregulated offshore platforms.
Market data provides its own counterargument to the shadow-banking thesis. Institutional investors have begun shifting custody off-exchange to mitigate counterparty exposure, according to the BIS paper. The crypto custody market was valued at $3.69 billion in 2026 and is projected to reach $7.74 billion by 2032, growing at a 13% CAGR — a trajectory consistent with institutional demand for segregated custody separate from exchange risk.
Self-custody adoption is also rising: 59% of crypto wallet users globally now prefer non-custodial wallets, up from approximately 45% before the FTX collapse, according to industry surveys. The market is pricing in counterparty risk, even if regulators have not yet codified protections against it.
Meanwhile, Tether reported freezing $344 million in USDT tied to alleged criminal activity — a reminder that stablecoin issuers' relationships with MCIs create additional transmission channels for risk.
The BIS report recommends a dual regulatory approach:
Entity-based regulation. MCIs performing banking-like functions should face banking-like requirements, including capital adequacy, liquidity reserves, and governance standards proportionate to their systemic footprint.
Activity-based regulation. Earn products, lending, and leverage services should be regulated regardless of the type of entity offering them. This would prevent MCIs from exploiting regulatory gaps by structuring activities outside existing licensing categories.
The report also calls for "enhanced cross-border supervisory cooperation," acknowledging that MCIs typically operate across dozens of jurisdictions simultaneously. Binance, for example, holds licenses or registrations in over 20 countries but structures its global operations through entities in multiple jurisdictions — making consolidated supervision difficult.
The BIS report does not call for banning crypto exchanges or eliminating yield products. Its argument is more precise: entities performing the economic functions of banks should face the prudential requirements of banks. The current state — where platforms managing hundreds of billions in user assets operate under consumer protection standards designed for retail merchants — represents a structural mismatch between risk and regulation.
The $3 trillion crypto asset market at end of 2025 is not large enough to pose systemic risk to the $170 trillion global banking system on its own. The BIS concern is about trajectory. As MCIs deepen relationships with banks, stablecoin issuers, and institutional investors, the interconnections that transmitted the Celsius-FTX contagion in 2022 are growing denser, not thinner. The October 2025 flash crash was a $19 billion stress test. The question the BIS poses is what happens when the next one is larger — and whether the regulatory infrastructure will exist to contain it.