CeFi (Centralized Finance )

This is in contrast to decentralized finance (DeFi), where users retain custody of their own assets while interacting with onchain financial services. CeFi is the traditional gateway to crypto, and follows an onboarding process that is more familiar for users of traditional online financial platforms.

Users create an account, submit KYC documents and deposit fiat currencies such as USD or GBP. They can then trade crypto on the platform, while the operator retains custody of the underlying digital assets on their behalf. This is similar to the way a traditional brokerage operates — customers typically do not directly hold the stocks they purchase, instead trusting the platform to manage them.

CeFi platforms like Coinbase and Binance typically use a mix of cold and hot wallets to store crypto. Cold wallets are for long-term storage and are therefore not connected to the internet. Hot wallets are used to manage onchain deposits and withdrawals.

Trades are processed through a centralized order book, while customer balances are recorded in an internal database, rather than directly onchain. This means the assets sit idle in the platform’s wallets while customers essentially trade ownership claims.

For many users, the convenience of CeFi is its main appeal. While self-custody and DeFi can be complex for beginners, CeFi platforms feature familiar quality-of-life features like account recovery and customer support. Some also operate under national financial regulation, adding a layer of oversight absent from DeFi.

The tradeoff can be summarized in a well-worn crypto saying: not your keys, not your coins. Several major CeFi platforms, including FTX and Mt. Gox, have collapsed in the past, leaving users unable to access their assets. CeFi platforms are also lucrative targets for hackers, as proven by the $6.3 billion Binance hack in October 2026.