Centralized Exchange (CEX)
A centralized exchange (CEX) is a centrally managed trading platform where you can buy and sell cryptocurrencies. One organization operates the platform, which often also lets you store your crypto.
What is a centralized exchange?
A centralized exchange, or CEX, is a crypto exchange operated by a company or organization. You usually create an account, complete an identity check, and then you can buy and sell cryptocurrencies. Many CEXs also support deposits in euros or other traditional currencies.
The organization behind a CEX decides which cryptocurrencies are available, what trading fees apply, and how the platform works. Many centralized exchanges also store their customers' crypto. This means the platform manages the private keys that give access to those cryptocurrencies.
Many CEXs use an order book. This is a list of users' buy and sell orders. The trading platform matches buyers with sellers and executes trades when their orders match. These trades are usually processed internally and aren't recorded individually on the blockchain.
The opposite of a centralized exchange is a decentralized exchange (DEX), where users usually trade directly from their own crypto wallet.
An example of a centralized exchange
Say you want to buy €100 worth of Bitcoin. You create an account on a centralized exchange, complete the required identity check, and deposit €100 with the exchange.
Next, you place a buy order for Bitcoin. Once your purchase is complete, the Bitcoin you bought appears in your account. On a custodial CEX, the platform manages the related private keys and keeps track of how much Bitcoin belongs to you.
Want to store your Bitcoin yourself? If the platform supports withdrawals, you can send it to your own crypto wallet. When you manage the private keys yourself, you also control access to your Bitcoin.
Why is a centralized exchange important in crypto?
Centralized exchanges play an important role in the crypto market. They make it easy for many people to buy and sell cryptocurrencies using euros or other currencies. They also bring buyers and sellers together, contributing to the liquidity and price discovery of cryptocurrencies.
Crypto news regularly covers centralized exchanges. Topics include new crypto listings, changes in trading volumes, security incidents, and new regulations. For example, when a large CEX lists a cryptocurrency, more people may gain access to it. This can affect demand and possibly its price.
Oversight of centralized exchanges is also an important topic. In Europe, providers of certain crypto services are subject to the European MiCA regulation. Among other things, it sets requirements for licenses, the protection of customer assets, and business operations.
