What Is CEX (Centralized Exchange)?
Also known as: Centralized Exchange, Centralized Crypto Exchange
In short
A CEX (centralized exchange) is a cryptocurrency exchange in which a single company holds user funds and matches buy and sell orders; it typically offers fiat on- and off-ramps, identity verification and customer support.
On centralized exchanges, the cryptocurrencies deposited into a user's account are held in wallets controlled by the exchange; trades within the exchange are recorded not on the blockchain but in the exchange's own database. Buyer and seller orders are brought together on an order book by a matching engine. This structure provides high transaction speed, deep liquidity, and the ability to offer many products, such as futures, margin trading and staking, in a single interface.
Centralized exchanges are subject to regulation in most countries and apply KYC (know your customer) procedures as part of anti-money laundering (AML) requirements. In Turkey, under the regulation introduced by Law No. 7518, crypto exchanges are subject to authorization and supervision by the Capital Markets Board (SPK) as crypto asset service providers (CASPs).
The main risk of centralized exchanges is counterparty risk: if the exchange is hacked, goes bankrupt or freezes withdrawals, users may be unable to access their assets. The collapse of FTX in 2022 is a concrete example of this risk. For this reason, some exchanges publish proof of reserves, while some users prefer to keep their long-term assets in their own wallets.
Last updated: · This content is for information purposes only and is not investment advice.