The Bank for International Settlements' Financial Stability Institute published an occasional paper arguing that many large cryptoasset service providers now operate as multifunction cryptoasset intermediaries that perform bank- and prime broker-like intermediation, but often without equivalent prudential safeguards. It concludes that MCIs engaged in risk transformation should be treated as financial intermediaries for regulatory purposes, using a mix of entity-based and activity-based approaches. Drawing on a review of terms and conditions at selected large MCIs between November 2025 and March 2026, the paper finds that many “earn” products transfer ownership of customer assets to the MCI, creating short-term redeemable liabilities that are economically similar to deposits, while margin lending and derivatives can materially amplify credit and market risk, including through very high leverage. Mapping these products to intermediation functions and balance sheet implications, it highlights liquidity, maturity, credit and collateral transformation vulnerabilities that are aggravated by cryptoasset volatility, interconnectedness, limited disclosures (including non-publication of financial statements at many MCIs) and the absence of backstops such as deposit insurance or central bank liquidity facilities. It uses the failures of Celsius Network and FTX in 2022 and the October 2025 cryptoasset flash crash as illustrations of how shocks can propagate and potentially spill over as links with traditional finance deepen. Policy options set out include consolidated supervision and prudential requirements such as capital and liquidity buffers, governance and risk management standards, and stress testing, supplemented by activity-based tools such as minimum margin requirements and customer asset protection and consent regimes for asset use and reuse, alongside potential activity restrictions or structural separation in specific cases. The paper also flags implementation challenges, including gaps in many jurisdictions’ coverage of borrowing and lending and investment programmes, the need for cross-border supervisory cooperation, limited supervisory resources, and underdeveloped data availability and reporting standards.
Bank for International Settlements - Financial Stability Institute 2026-04-23
Bank for International Settlements Financial Stability Institute paper calls for prudential oversight of multifunction cryptoasset intermediaries
The BIS Financial Stability Institute says many large cryptoasset service providers now act as multifunction intermediaries performing bank- and prime broker-like roles without equivalent prudential safeguards, and should be regulated as financial intermediaries via a mix of entity- and activity-based rules. It flags deposit-like “earn” products, leverage-driven margin lending and derivatives, and related liquidity, maturity, credit and collateral transformation risks, worsened by volatility, opacity and lack of safety nets. Policy options include consolidated supervision, capital and liquidity requirements, governance and risk standards, stress testing, margin floors, customer asset protection and possible activity limits, but face legal, cross-border, resource and data constraints.