Crypto glossary
CEX (centralized exchange)
A CEX, or centralized exchange, is a company-run platform such as Coinbase or Binance that holds customer funds and matches crypto trades on its books.
A centralized exchange works much like a traditional brokerage. Customers open an account, verify their identity, deposit fiat money or crypto and trade on an internal order book. Most trades never touch the blockchain: the exchange simply updates balances in its own database and only moves coins on-chain for deposits and withdrawals.
Centralized exchanges offer deep liquidity, fiat on-ramps, customer support and products such as margin and futures trading. In most jurisdictions they must follow KYC and anti-money laundering rules, and in the European Union they need a license under MiCA.
The main risk is custody. Funds held on an exchange are an IOU from that company, so hacks, mismanagement or insolvency can leave customers unable to withdraw, as the collapses of Mt. Gox in 2014 and FTX in 2022 showed. Many exchanges now publish proof-of-reserves reports, and users who want full control move coins to a self-custody wallet.
Example
A user wires €500 to their Kraken account, buys bitcoin on the exchange's order book and later withdraws it to a hardware wallet, paying a withdrawal fee for the on-chain transfer.
Related terms
Latest articles on CEX
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