A centralized cryptocurrency exchange (CEX) is a trading platform operated by a company that intermediates transactions between market participants. The exchange operator controls account access, supported assets, trading rules, custody arrangements, and infrastructure. When you deposit crypto into a CEX, the exchange takes custody of your funds, holding them in wallets managed by the operator or its custodian. Your account balance is based on the platform’s internal records and legal terms.
Key Components
A CEX relies on several components, including order books, matching engines, and custody arrangements. The order book displays open buy and sell orders, organized by price and time priority. The matching engine processes incoming instructions and executes compatible orders under the exchange’s rules.
Trading on a CEX
Trading on a CEX typically involves six stages: verification, funding, selecting a trading pair, placing an order, internal settlement, and withdrawal. The exchange may require identity verification, and you may need to complete KYC checks before trading or accessing higher limits.
Custody and Settlement
Custody determines who can authorize transactions involving deposited assets. On a CEX, control generally rests with the platform or a third-party custodian rather than with you directly. Most CEX trades settle off-chain, with the exchange updating customer balances in its internal ledger rather than creating a blockchain transaction for every purchase or sale.
