Custodial Control
Centralised exchanges hold users’ funds on their own servers, which means traders rely on the platform’s security rather than their own. If the exchange is hacked or mismanages reserves, users may face delays or losses. This reliance removes the independence that many seek in crypto.

Security Risks
Because these platforms store large amounts of assets in one place, they become prime targets for attackers. Even strong security systems can be breached, and history shows several major exchanges have suffered significant incidents. Users carry the risk even if they were not at fault.

Limited Privacy
Most centralised exchanges require identity verification. While it helps meet regulations, it reduces privacy for users who prefer to keep personal information minimal. Sensitive data stored by exchanges can also be exposed if systems are compromised.

Withdrawal Restrictions
During periods of high volatility, exchanges may slow withdrawals or impose limits. These delays can prevent traders from reacting to fast-moving markets. Users depend entirely on the platform’s operational stability.

Centralized Decision-Making
Policy changes, listing decisions, and fee adjustments are controlled by the exchange. Users have little influence over these choices, which can affect trading conditions and access to certain coins.

Regulatory Exposure
Centralised exchanges must follow local rules, which can lead to sudden service changes or regional restrictions. Traders may lose access if regulations shift, making long-term planning difficult.