Unregulated crypto intermediaries pose financial stability risks
A Bank for International Settlements (BIS) paper highlights that cryptoasset service providers (CASPs) increasingly act as financial intermediaries, taking on credit, liquidity, and maturity risks without adequate prudential safeguards. This creates significant vulnerabilities for financial stability.
The rise of multifunction intermediaries
Cryptoasset service providers (CASPs) have evolved beyond simple trading and custodial roles, with the largest firms now operating as multifunction cryptoasset intermediaries (MCIs).
These MCIs offer a broad range of products, including yield/earn programmes, margin and secured lending, derivatives, and token issuance.
Many of these activities closely resemble traditional financial intermediation, where MCIs accept customer cryptoassets and use them to fund lending and market-making.
This exposes them to credit, liquidity, and maturity risks.
Crucially, these MCIs often operate without the prudential safeguards, such as capital and liquidity requirements, that typically apply to regulated financial intermediaries engaged in comparable risk transformation.
Interconnectedness and contagion
The financial intermediation functions performed by MCIs introduce significant vulnerabilities, particularly given the volatile nature of cryptoassets and the interconnectedness of these entities.
Unlike traditional finance, the crypto ecosystem lacks essential safety nets like deposit insurance or central bank liquidity facilities.
The paper highlights that many MCIs do not publish financial statements, creating transparency gaps.
Past failures, such as Celsius Network and FTX in 2022, and the cryptoasset flash crash of October 2025, illustrate how these risks can materialize and propagate.
As MCIs deepen their links with traditional finance, the potential for spillovers into the broader financial system grows.
A regulatory gap, a ticking clock
The paper clearly outlines the urgent need for robust regulatory frameworks to address the systemic risks posed by these unregulated entities.
Without comprehensive prudential safeguards, the growing links between crypto and traditional finance could lead to significant spillover effects.
This research serves as a critical warning, emphasizing that inaction could have severe consequences for broader financial stability.