DEX vs CEX Explained (Differences in fees, features & safety)

When deciding to buy crypto from an exchange, centralised exchanges (CEX) or decentralised exchanges (DEX) are the most common options. This guide breaks down the key CEX vs DEX differences to help you choose the option that’s right for you.

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What is a centralised crypto exchange?

Centralised exchanges (CEXs) are the most common trading platforms for crypto. They’re managed by a central authority (business) that oversees transactions and acts as an intermediary between buyers and sellers.

Much like a bank safeguarding funds, CEXs manage users’ crypto wallets and private keys—unique codes that authenticate ownership and authorise transactions. By handling these keys, the exchange secures funds, processes transactions, and provides users access through their trading accounts.

Because of their direct role in securing user assets, CEXs must comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, which mandate identity verification.

Examples of Australian-based CEXs include Independent Reserve, founded in 2013, Binance, Coinspot, and Cointree. Examples of Singapore-based CEXs include Independent Reserve, Coinhako and Coinbase.

Advantages of centralised exchanges

Ease of use and accessibility

Ease of use is a key advantage of centralised digital currency exchanges, which often feature familiar, intuitive interfaces, direct 24/7 customer support, and account recovery solutions.

With CEXs managing private keys and crypto wallets, users can recover accounts if needed, eliminating the risk of permanent fund loss due to lost keys. This simplicity makes centralised exchanges particularly appealing for users unfamiliar with private keys and navigating blockchain networks.

Fiat to crypto integration

CEXs are the primary gateway for transitioning between fiat currencies (e.g., AUD, SGD or USD) and crypto. However, not all CEXs facilitate fiat deposits (e.g. Binance doesn’t facilitate AUD deposits in Australia).

Australian crypto exchange platforms such as Independent Reserve allow fiat deposits through PayPal, bank transfers, and credit or debit cards. Crypto can then be easily purchased, or sold and converted back into fiat for withdrawal to a nominated bank account. Withdrawals of crypto can be made directly to user crypto wallets (including via integrated cross-chain support).

Conversely, decentralised exchanges (DEXs) primarily facilitate crypto-to-crypto trades. DEX users often rely on CEXs or third-party payment platforms (e.g., MoonPay or Ramp) to handle fiat conversions.

Compliance and security

CEXs enforce Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, ensuring better user verification and reducing risks associated with fraud, money laundering, and other illicit activities. The clearer regulatory framework of CEXs provides added confidence, particularly for institutional investors.

At the time of writing, the Australian Securities and Investments Commission (ASIC) is consulting on new regulations for centralised crypto exchanges, which are expected to further enhance regulatory clarity.

Reputable CEXs also proactively implement advanced security measures to safeguard user assets and data. For example, Independent Reserve employs measures including two-factor authentication (2FA), ISO 27001 certification, and cold storage solutions to protect against cyber threats. Regular third-party audits further ensure these protections are continuously tested and improved.

Learn more about the security and safety of crypto exchanges.

Disadvantages of centralised exchanges

Management risks

As in the case of most traditional financial institutions or services, because CEXs hold user funds, these funds may be at risk in the rare instances that the exchange itself is poorly managed.

For example, in 2022, the collapse of FTX exposed significant misuse of client funds, sparking widespread insolvency and disruptions across the crypto industry. Look for exchanges that ensure complete segregation of client funds and direct custody of assets without reliance on third-party custodians.

Security risks

Relatedly, because CEXs store personal data, funds, and crypto assets in centralised locations, they can sometimes be attractive targets for potential hackers. In rare instances, this can result in security breaches, such as in the 2014 breach of Japanese exchange Mt Gox. In contrast, DEXs are generally less susceptible to centralised attacks but are more vulnerable to exploits in their smart contracts (such as SushiSwap’s 2021 exploit).

Users should prioritise established CEXs with world-leading account and system security.

Less privacy

As with traditional banking, while KYC/ALM regulations promote greater regulatory compliance among CEXs, transactions are traceable and personal information may be disclosed when required by authorised government agencies. This disadvantages users who value trading without identity documentation requirements or government oversight.

DEXs offer greater privacy than centralised exchanges because they do not often require KYC/ALM. This is partly due to the decentralised structure of DEXs, which poses significant challenges for regulatory oversight, as there may be no identifiable entity to hold accountable for compliance.

However, it is important to note that DEX transactions on a blockchain are not entirely anonymous. Crypto wallet addresses are visible and can sometimes be traced back to real identities through advanced analytics.

Further, to convert cryptocurrency into fiat currency, users often need to use a CEX or third-party payment services. These services are usually regulated and require KYC.

What is a decentralised crypto exchange?

Decentralised exchanges (DEXs) offer an alternative way to trade cryptocurrencies. Unlike traditional platforms, DEXs may operate without direct oversight or management of transactions and accounts, giving users full control over their assets.

While DEX platforms are decentralised, they are often initially developed and launched by teams or companies before transitioning to a more decentralised model. For example, Uniswap was created by Hayden Adams with investor backing, while SushiSwap was launched anonymously by a developer known as Chef Nomi.

To trade on a DEX, users connect their personal crypto wallets, such as MetaMask or Trust Wallet, directly to the platform. Because the exchange does not hold customer funds, traders must take full responsibility for securing their assets. While this offers greater control and privacy, it also requires a deeper understanding of blockchain technology, including how to manage private keys and navigate different networks.

DEXs are widely accessible in Australia, but due to their decentralised nature, no major platforms are headquartered locally. Instead, they operate globally across various blockchain networks, providing users with permissionless access to cryptocurrency trading.

Learn more about how crypto exchanges work.

Advantages of decentralised exchanges

Newest and small-cap token offerings

Since decentralised exchanges (DEXs) operate without stringent oversight, it is easier for new projects to list their crypto tokens. Platforms like Uniswap and PancakeSwap support thousands of cryptocurrencies, giving users access to a diverse range of small-cap tokens, including early-stage projects that may not yet be available on centralised exchanges (CEXs).

Tokens often initially trade at lower prices on DEXs before gaining visibility and potentially higher prices on CEXs. This allows early adopters to buy in at a lower cost – as seen in $PNUT, $TRUMP, and $Kira coins.

Access to wider DeFi opportunities

DEXs provide users with full control over their assets, allowing them to explore a broader range of decentralised finance (DeFi) opportunities. For example, Uniswap enables users to contribute tokens to liquidity pools and earn trading fees in return. Other platforms offer native token rewards, incentivising participation in DeFi ecosystems and expanding earning opportunities beyond simple trading.

Self-custody and governance

Unlike centralised exchanges, most DEXs do not require Know Your Customer (KYC) verification, allowing users to trade without restrictions. This decentralised structure enhances financial autonomy, making it more difficult for accounts to be frozen or transactions to be censored.

Some DEXs also feature governance tokens, enabling users to vote on key protocol decisions, such as fee structures or system upgrades. While the level of influence varies, this community-driven approach appeals to users who prefer decentralised governance over centralised control.

Disadvantages of decentralised exchanges

Less user friendly

Since DEX users self-manage their crypto assets, losing private keys or hardware wallets can result in permanent loss of funds, as these cannot be reset or recovered. In contrast, centralised exchanges (CEXs) offer account recovery options—losing a password does not mean losing access, and customer support is available to assist with recovery and security issues.

Navigating DEXs also requires a stronger understanding of blockchain technology and wallet management. Mistakes—such as sending funds to the wrong network address—are common and often irreversible. Unlike CEXs, which sometimes provide dedicated support teams, DEX platforms like Uniswap do not offer traditional customer service, leaving users to rely on community forums, documentation, and online resources for troubleshooting.

Token risks

While DEXs allow easy token listings and access to thousands of cryptocurrencies, the lack of stringent vetting processes exposes users to potential risks. One major concern is “rug pulls,” where developers drain liquidity from a project and disappear with investor funds. Additionally, some tokens may be poorly designed or unstable, leading to unexpected losses. A notable example is the Squid Game (SQUID) token, where developers disabled selling and made off with US$3.36 ($4.65) million in investor funds.

Some DEXs implement verification measures to enhance listing integrity. For example, PancakeSwap provides verified token badges, while other platforms incorporate governance mechanisms or community oversight. However, these safeguards are not infallible, and users should exercise due diligence, particularly when trading newly launched or lesser-known tokens.

Regulatory risks

DEXs typically face less regulatory scrutiny than centralized exchanges (CEXs) due to the lack of a clearly identifiable entity overseeing transactions. The absence of Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols means users can trade anonymously, but this also raises concerns about the potential circulation of non-compliant and illicit tokens or transactions.

CEXs, on the other hand, are subject to strict regulatory frameworks designed to protect investors and prevent financial crime. For example, in Australia, privacy coins are typically excluded from CEX listings due to anti-money laundering laws, ensuring stronger compliance with financial regulations.

However, as global regulatory bodies continue to strengthen oversight of virtual assets, DEXs may find themselves operating in an increasingly complex landscape. In Australia, ASIC has recently announced plans to enhance digital asset regulations, aiming to close compliance gaps in the industry. Meanwhile, Singapore’s Monetary Authority of Singapore (MAS) continues to refine its regulatory framework, striking a balance between fostering innovation and ensuring consumer protection.

These developments suggest that while DEXs currently operate with relative freedom, growing regulatory scrutiny could lead to new compliance requirements in the future, particularly within the context of recent amendments introduced late 2024 in Australia.

CEX vs DEX feature comparison

Centralised exchanges (CEXs) act as intermediaries, managing user crypto wallets and private keys, and providing user-friendly interfaces for trading with fiat support.

In contrast, decentralised exchanges (DEXs) rely on blockchain-based smart contracts for direct peer-to-peer trading, offering greater privacy, token variety, and self-custody but requiring more technical expertise. A comparison of key features is listed below:

Feature	CEX (centralised exchange)	DEX (decentralised exchange)
Ease of use	User-friendly interfaces, accessible to beginners, customer support and account recovery features.	Often requires more technical knowledge, such as setting up private wallets and understanding blockchain networks. Some DEXs (particularly hybrid platforms) may offer differing levels of support.
Compliance and privacy	CEXs require identity verification to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) laws. User data may be shared with government agencies for taxation and other regulatory purposes.	Offers greater privacy as no KYC is required, but transactions on public blockchains may still be traceable.
Custody	Funds and private keys are managed by the exchange, simplifying access but requiring trust in the platform. Users do not control their private keys.	Users retain full control of their assets, but self-custody increases the risk of losing funds due to user errors or phishing attacks.
Deposit & withdrawal currencies	Deposit and withdraw fiat (including AUD, SGD, USD, NZD), and crypto.	Typically crypto only, though some DEXs offer third-party fiat integration.
Deposit methods	Supports fiat-to-crypto and crypto-to-fiat transactions, enabling seamless onboarding for new users via PayPal, bank transfers, or credit or debit cards.	Primarily facilitates crypto-to-crypto trades with limited or no native fiat support. Some DEXs allow fiat deposits via external services.
Withdrawal & deposit fees	Fixed fees for trades, deposits, and withdrawals. Additional fees may apply for currency conversions.	Fees are network-based, fluctuating depending on blockchain congestion and gas fees. Certain token swaps may have fees.
Trading fees	Trading fees vary by exchange but are typically fixed or tiered based on trading volume.	Fees are typically more variable as they depend on network conditions.
Token listings	Curated and compliant with regulatory standards, ensuring fewer scams and high liquidity. Limited access to new or experimental tokens.	Broader token access, including small-cap and newly launched tokens, though some may carry higher risks due to potentially less stringent vetting..
Security	Strong security measures like two-factor authentication (2FA) and cold storage, but some centralised assets may be vulnerable to large-scale hacks.	Funds are decentralised, reducing the risk of a central system being compromised. However, potentially more vulnerable to smart contract vulnerabilities, phishing and malware attacks, and user errors (e.g., lost private keys).
Trading tools	CEXs offer different trading options. More advanced exchanges facilitate features like API, limit orders, leveraged trading, stop-loss orders, market orders and OTC desks.	Similar to CEXs, DEXs can both have advanced and limited trading options.
Governance	Centralised decision-making by the exchange operator.	Governance varies by DEX, with some allowing token holders to vote on proposals, while others rely on core teams or major stakeholders for decision-making.
Liquidity	On a CEX, liquidity mainly comes from market makers, institutional traders, and retail users placing orders on an order book. This helps ensure faster trades and stable prices for popular assets.	On a DEX, liquidity primarily comes from users who deposit funds into shared trading pools, though some platforms also attract professional market makers or other external liquidity sources. Popular assets often have strong liquidity. Learn more.

How to choose between a CEX and a DEX

There are many variables to consider when choosing between centralised and decentralised crypto trading platforms. These can include:

Asset availability: Determine where your tokens are listed. Major cryptocurrencies are commonly available on CEXs, while niche or newly launched tokens often debut on DEXs.
Custody: Decide between exchange-managed custody and self-custody.
Privacy and regulation: CEXs require KYC to comply with regulations, while DEXs allow more privacy. Consider a CEX if compliance and traceability are important, or a DEX if you value trading privacy.
Fiat integration: Consider whether you need fiat-to-crypto functionality. CEXs provide fiat on-ramps, such credit and debit cards, PayPal, or bank transfers. Many DEXs don’t natively support fiat, and require you to already own cryptocurrency. However some hybrid platforms integrate third-party fiat options.
Ease of use: Evaluate the platform’s ease of use, available tools, and overall user experience.
Customer support: Investigate the quality of the exchange’s customer support.
Fees: Compare trading, withdrawal, and other charges. CEXs often have predictable fees but may include network charges for crypto withdrawals. DEX fees are tied to blockchain activity, which can make costs less predictable. Hybrid platforms may offer dynamic or off-chain solutions to reduce fees.
Liquidity: Consider the exchange’s trading volume to ensure you can execute trades quickly and at your desired price.
Transparency: Look for exchanges that provide clear information about their team, operational processes, and the security of users’ funds.
Security: Look for strong security measures, such as two-factor authentication, cold storage, and 1:1 reserves of customer assets.
Blockchain compatibility: DEXs typically support specific blockchains (e.g., Uniswap on Ethereum). If your desired asset is only on a DEX, ensure you hold the correct tokens (e.g., ETH for Ethereum-based DEXs or SOL for Solana-based DEXs) to enable payment of network use charges. For example, transactions on any DEX based on the Ethereum network will charge ETH “gas” fees.Some CEXs, like Independent Reserve, offer cross-chain support, which enables easy movement of assets between CEXs, DEXs and other decentralised finance (DeFi) opportunities.

How to register with a crypto exchange

Independent Reserve is a digital currency exchange that enables clients from Australia, New Zealand, and Singapore to buy, sell and hold crypto. Whether you’re an individual or representing a company, a trust or an SMSF, we can cater to your needs. Click here to register.

Frequently asked questions

Do crypto exchanges offer business accounts?

Yes, Independent Reserve provides accounts for businesses, including SMSFs and trusts. Benefit from high deposit/withdrawal limits, advanced reporting tools, and over-the-counter trading support for large transactions.

What fees do crypto exchanges charge?

Crypto exchanges charge fees for deposits, withdrawals, and trades. Deposit fees vary by method, while withdrawal fees often depend on the asset or blockchain. Compare the fees charged by Australian and Singaporean crypto exchange platforms.

How does Independent Reserve mitigate risks associated with exchanges?

Independent Reserve employs enterprise-grade measures such as cold storage for the majority of digital assets, two-factor authentication (2FA), and regular third-party security audits to minimise risk. The exchange is also a member of the Digital Economy Council of Australia (DECA; formerly named Blockchain Australia), demonstrating its commitment to industry best practices and responsible growth.

Additionally, Independent Reserve is regulated under the Australian Transaction Reports and Analysis Centre (AUSTRAC), and holds a licence as a specialist crypto exchange in Singapore under the Monetary Authority of Singapore (MAS), reflecting our dedication to regulatory compliance and operational integrity.

Explore safety considerations of exchanges further.

How do I choose between a CEX and a DEX?

When selecting a crypto exchange, check its reputation and security features, like two-factor authentication and cold storage. Compare fees, deposit, and withdrawal options, such as bank transfers or PayPal, to find what works best for you.

Assess the platform’s ease of use, trading tools, and liquidity to ensure smooth and efficient trading. Lastly, ensure the exchange has responsive customer support, and provides clear information about its processes, infrastructure and security.

Explore how to select the right crypto exchange further.

Which is safer: a centralised or decentralised exchange?

Centralised crypto exchanges (CEXs) provide stronger compliance and regulatory protections, making them safer from illegal activity. Decentralised exchanges (DEXs) avoid centralised risks. However, DEX self-custody requirements and reliance on user-managed wallets increase the risk of losing funds through errors. Learn more.

Decentralised vs. centralised crypto exchanges (DEX vs CEX explained)

What is a centralised crypto exchange?