Centralised finance is a financial service that allows an individual to earn interest and apply for loans on their cryptocurrency. This means financial activities are done on the digital currency through centralised exchange platforms.
It is important to state that these Cefi platforms are well structured and as well, ensure the availability of customer support avenues for an effective user-centric experience. The same way the bank handles our Fiat money is the same way CeFis manages our digital wallets, although, CeFis have lower charge rates compared to the traditional banks.
However, being introduced before defi, there are a number of FinTech companies around the World offering CeFi services. Most CeFi service providers are systemised under the local policy where they operate, enabling them to execute Know Your Customer (KYC) and Anti Money Launderying (AML) processes in every user’s transaction.
Difference between centralised finance and decentralised finance
Despite their similarities, there are some major differences between Centralised Finance and Decentralised Finance.
- CeFi– System is regulated and exchange platforms is given more authority
- DeFi – Not regulated and more authority and control of data is given to the user
- CeFi – users are required to input their personal information before getting started.
- DeFi – Users’ personal information are not required for gaining access
- CeFi – Flexible conversion of Fiat to Crypto & vice versa, payment, borrowing and lending
- DeFi – Permissionless for payment, borrowing and lending with less flexibility for fiat to crypto conversion