What are Centralized Crypto Exchanges (CEX) in 2025 – Advantages, Risks & How They Work

During the inception of cryptocurrency, most transactions were unregulated. Most of the deals were peer-to-peer or in unregulated markets, accessible only to tech-savvy individuals who could write a few lines of code. The place was filled with numerous scammers as well. It was pretty much like the Wild West of fintech. 

And this led to the inception of Centralized crypto exchanges (CEX). A place where people could make crypto transactions safe and easy. The platform was user-friendly, with great customer support, high liquidity, fiat integration, and many more features. This led to a new beginning, which marked the start of a new revolution.

What is a Centralized Crypto Exchange(CEX)?

A Centralised crypto exchange is an online platform owned and operated by a single entity that can act as an intermediary to facilitate buying, selling, and trading in the domain of cryptocurrency.

A CEX maintains information about users, provides security measures for the users, manages their accounts and capital, and puts these funds in escrow for their safety. Every CEX is registered and regulated by its government. Implementation of these steps made it more secure and robust, giving access and appeal across various demographics.

List of the Top 10 Centralized Exchanges

Advantages and Disadvantages of CEX

The Centralized CryptoCurrency Exchanges indeed changed the dynamics of the crypto market, but just like every coin has two sides, CEXs have some advantages as well as disadvantages.

Advantages of CEX

1. Established structure

Almost all CEXs feature an established structure that makes them reliable for trading. This structure makes things easy and will also bring a sort of peace to the traders, knowing their funds are safe. They also operate under a strict set of rules and regulations.

2. Security

Most of the top-rated CEXs invest heavily when it comes to protecting the data and money of their customers. From multifactor authentication to encryption, the platforms use and deploy different security measures to keep the criminals at bay.

3. Liquidity 

Centralised exchanges typically have a wide user base where they buy and sell different tokens of different variations, and because of this, most CEXs have high liquidity. This liquidity enables the investors to trade cryptocurrencies easily at reasonable prices

Also read: 5 Best Risk Management Strategies For Trading Crypto

Disadvantages of CEX

1. Limited Privacy 

The main idea of cryptocurrency, when it was created, was to give complete privacy and leave no paper trails, and be completely decentralized. But when you trade through CEX, you have to give your details and fill out a KYC, which pretty much defeats the purpose it was created for.  

2. Centralized Control 

The centralized nature of this whole system comes with cons since they are managed by a single entity. That single entity has control over the whole platform. This can raise issues of censorship. 

3. Security Vulnerabilities

Centralised systems often have the best security measures, but are still vulnerable to hacking and many other security threats. A single security breach can lead to losses for both the investors and the platform.

Difference Between CEX and DEX

There are many differences between a Centralised Crypto exchange and a Decentralised Crypto exchange. The main difference is that the DEX is more private than the CEX, and the  CEX is safer and secure than the DEX. Let’s take a closer look at them.

How CEX Works

When it comes to CEX, you deposit your tokens into the exchange’s wallet, and the CEX then keeps the funds till you trade. All orders are matched and made through an order book system, which matches buyers and sellers. 

CEX is more beginner-friendly, and it’s very liquid and is regulated, but the risks are that you trust your CEX with your private keys, so if it is hacked, then you risk losing your funds. Most of them also have fees from trading to withdrawals, which may reduce the profits over time.

How DEX works

DEXs are peer-to-peer platforms where users connect directly to trade crypto; they run without a middleman and rely directly on smart contracts for trading. When it comes to DEXs, trading occurs directly from the user’s personal wallet, and there is no need to transfer funds to exchanges. This adds an extra layer of security since you don’t have to connect it to any third-party applications.

But DEX can be complex for starters, and more difficult to use for beginners, and has low liquidity, which makes the execution slower, especially with less popular tokens.

Also Read: Best Decentralized Exchanges (DEX) in 2025

Conclusion 

The Centralised Crypto Exchange is an online platform that is owned and operated by a single entity that can act as a middleman to facilitate buying, selling, and trading. It’s the most suitable crypto platform for laymen since the DEX is more complicated and has low liquidity rates. IF you are planning to trade, it’s better to keep a separate wallet connected to the CEX and replenish the funds once in a while according to your trading level. 

Frequently Asked Questions