Centralized cryptocurrency exchanges (CEXs) are gateways to the digital ecosystem. They’re the on- and off-ramps that help people buy, sell, and trade cryptocurrencies, as well as offering custodial solutions for those that don’t want self-custody crypto. Even in a world where decentralized exchanges are prevalent, centralized exchanges offer hardened security protocols against hackers and a more robust trading environment that many institutional and retail traders prefer.
That doesn’t mean centralized exchanges are immune to security breaches. Over the past year there have been a number of regional CEX’s that have been hacked.
These hacks serve as lessons learned for the industry as a whole and help to further security and compliance measures against future hacks. As Binance Head of Regional Markets Vishal Sacheendran explains, “At the end of the day, a hack on one of our own people within the industry is a hack on the entire industry. Everyone takes a hit, not just the users but also the regulators and the critics of crypto. It’s an opportunity for us to come together, rebuild trust, and show that we are capable of helping each other. This year alone, Binance has helped recover over $80 million in stolen funds, and we’ve helped prevent billions in fraud. It’s all about collaboration and education, because as an industry, we grow stronger when we work together.”
That centralized role of these exchanges means a stringent set of security and compliance protocols. However, the red tape is a selling point for newcomers and institutions. It’s a sign that everything is above board and correct, and there are certain investor protections in place for centralized exchanges that offer custodial solutions. Here are the main factors that contribute to the security and compliance of centralized exchanges.
KYC, AML, and Constant Oversight
These principles go against the classic ideals of …
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