Cryptoasset service providers as financial intermediaries: risks and policy approaches
Cryptoasset service providers (CASPs) have expanded well beyond their initial roles as trading platforms and custodial service providers. The largest firms now offer a broad range of products, including yield/earn programmes, margin and secured lending, derivatives and token issuance. Some of these products closely resemble financial intermediation activities traditionally performed by banks and prime brokers. As such, many institutions can be better described as multifunction cryptoasset intermediaries (MCIs). When MCIs accept customer cryptoassets through investment programmes and use those assets to fund lending, market making and other activities, they take on credit, liquidity and maturity risk. Yet in many jurisdictions, MCIs operate without the prudential safeguards that typically apply to financial intermediaries engaged in comparable risk transformation.
This paper provides a structured overview of MCI products and maps them to the functions of financial intermediation. Drawing on a review of the terms and conditions (T&C) of selected large MCIs conducted between November 2025 and March 2026, as well as interviews with some providers and authorities, it shows how "earn" products that transfer ownership of customer assets to the MCI create short-term redeemable liabilities economically similar to deposits, while margin loans and derivatives amplify credit and market risks. The financial intermediation functions performed by MCIs introduce significant vulnerabilities, in particular given the volatile nature of cryptoassets, the interconnectedness of MCIs and the absence of schemes similar to deposit insurance or central bank liquidity facilities. Strikingly, many MCIs do not publish financial statements, and there are notable gaps in the applicability of existing or new regulatory frameworks. The failure of Celsius Network and FTX in 2022 and the cryptoasset flash crash of October 2025 illustrate how these risks can materialise and propagate, with growing potential for spillovers into the broader financial system as MCIs deepen their links with traditional finance.
Comprehensive policy approaches are needed to address these risks. MCIs engaged in financial intermediation should be subject to prudential requirements, including capital and liquidity buffers, robust governance and risk management frameworks, and stress testing. A combination of entity-based (EB) and activity-based (AB) regulation offers the most effective policy mix. However, several challenges remain, including incomplete coverage of borrowing and lending activities within existing cryptoasset regulatory frameworks, the need for effective cross-border supervisory cooperation, limited supervisory resources and – despite the public nature of blockchains – the underdeveloped state of data availability and reporting standards compared with those for traditional financial intermediaries.
JEL classification: E42, G18, G23, G28, O30, O38
Keywords: cryptoassets, cryptoasset service provider, decentralised finance, multifunction cryptoasset intermediary, regulation, supervision, virtual asset service provider
