CEX
Centralized Exchange
A CEX (centralized crypto exchange) is an intermediary company that holds clients' funds and matches buy and sell orders for crypto assets in its own order book.
## How it works
A CEX onboards users through registration and identity verification, then keeps internal balance records. Trades happen inside the exchange's system: orders are matched in the order book, and no actual transfer of coins between participants' wallets takes place until the user withdraws funds.
## Where it is used
CEXs serve as the main entry point into crypto. They handle fiat-to-stablecoin conversion and back (on-ramp and off-ramp), spot trading, futures, and margin trading. Many payment and processing schemes in high-risk verticals depend on these exchanges' KYC and AML requirements.
## What it affects
A CEX's policies set deposit and withdrawal limits, the list of available coins, payout processing times, and requirements for verifying the source of funds. For arbitrage traders and affiliate teams, this determines how long withdrawals take and how predictable access to liquidity is.
## Risks and common mistakes
The main risk is counterparty risk: the exchange controls clients' assets, so in the event of a hack, insolvency, or account freeze, those funds may become inaccessible. Common mistakes include keeping all capital on the exchange instead of in a cold wallet, not accounting for holds triggered by repeat verification, and sending funds to an address on the wrong network.
FAQ
How is a CEX different from a DEX?
A CEX is a centralized company that controls users' funds and accounts. A DEX runs on smart contracts without an intermediary, and the user holds the keys to their own wallet.
Is it safe to store crypto on a CEX?
Storing crypto on an exchange carries counterparty risk: a hack, liquidity problems, or an account freeze can restrict access to funds. Large amounts are usually kept in a cold wallet, with only a working balance left on the exchange.
Why does a CEX require identity verification?
The exchange must comply with KYC and AML requirements: verifying identity, checking the source of funds, and monitoring suspicious transactions. Without verification, deposit and withdrawal limits are usually much lower.