A CEX is like a traditional stock exchange for cryptocurrencies but with one entity controlling user balances, order books, and matching trades. Users deposit their coins into the exchange’s custody, meaning the platform can freeze withdrawals or potentially be hacked. Despite these custody drawbacks, CEXs remain popular for their liquidity, user-friendly interfaces, and broad token selections.

Regulatory oversight often requires robust KYC and AML measures, which can deter privacy-focused individuals. Still, many newcomers gravitate toward CEXs for ease of use—trading altcoins, accessing fiat on-ramps, and using advanced trading features. Just remember: “Not your keys, not your coins” continues to apply, as you’re dependent on the exchange’s solvency and goodwill.