CeFi vs DeFi: The Question That Decides Who's Actually Holding Your Crypto
Centralised finance platforms still handle the large majority of crypto activity. Here's what that actually means for custody, and why it matters more than most users realise.
By Firoz Khan|17 August 2026|Updated 20 September 2026|7 min read
CeFi, centralised finance, describes crypto platforms, exchanges, lending services, custodial wallets, run by a single company that controls the infrastructure and, critically, usually holds the actual private keys to user funds. It's the direct counterpart to DeFi, decentralised finance, where code and smart contracts perform those same functions without a company sitting in the middle.
What you're actually trusting when you use CeFi
A CeFi platform's solvency, its security practices, and its willingness to actually honour withdrawals when you request them. This isn't a hypothetical concern, several high-profile CeFi platform collapses have frozen or permanently lost customer funds, a risk category that simply doesn't exist in the same form with genuine self-custody.
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Why most people still use CeFi anyway
It's dramatically more convenient: familiar account-based login, customer support that exists at all, fiat on- and off-ramps to move between pounds and crypto, and none of the responsibility of managing your own private keys, where a mistake can mean permanent, unrecoverable loss with nobody to appeal to.
The genuine DeFi trade-off
DeFi removes the counterparty risk of trusting a company with your funds, replacing it with smart contract risk, exploits and bugs in the code itself, and the very real responsibility of managing your own keys correctly, with no password reset and no customer support line if something goes wrong.
A sensible way to split exposure
Many experienced users deliberately run both: CeFi for convenience, fiat conversion and active trading, self-custody for anything they intend to hold for the longer term. Understanding which one you're actually using for any given balance, and what that specifically means for who controls it, is the more useful question than which model is objectively 'better'.
A reminder
The FCA risk warning still applies to higher-risk crypto content. Always assess how much risk you are willing to take before buying.
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