Definition
Centralized finance (CeFi) refers to financial services managed by an identifiable intermediary rather than executed solely through user-controlled smart contracts. In crypto, the term commonly describes custodial exchanges, brokers and lending services.
How It Works
The provider usually maintains customer accounts, safeguards or controls deposited assets, and applies its own operating rules. Trades may be recorded in an internal ledger rather than individually settled on a public blockchain. Account recovery, customer support and connections to payment systems can make such services easier to use.
Key Considerations
Users depend on the provider’s custody practices, financial condition and withdrawal policies. Holding an account balance is different from controlling assets with a private key. CeFi is not automatically equivalent to a regulated bank, and protections vary by service and jurisdiction. A crypto business may combine centralized services with decentralized protocols.