Do centralized exchange feel same way as Financial Banks?

[Ahyeiyeiyei]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

[AmoreJaz]

It is not by any means advisable to store your coins in a centralized crypto-exchange. You will understand such piece of advise once you start experiencing trouble from that exchange. Do remember, they are vulnerable to attacks aside from the fact that inside job is also possible to happen. So if you are finished trading, better pull out your funds and it is better to store it in your own wallet where you have your own keys. Do remember - not your keys, not your crypto.

[Dunamisx]

To them, they may think they are vividly different from commercial banks, but to us, the users who knows their various capabilities, we don't see any difference, because of KYC and other challenges of using them, because we see them as custodial storages and these are not good for our own safety, except we make use of a decentralized exchange or uses a non custodial storage that gives us control over our coins.

[Hazink]

I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

Do you know that exchanges offer almost the same service as the banking sector? The banking sector offers fixed deposits and rewards for such, exchanges also offer staking, which is a way of telling their customers to keep their money with them and earn something in return?

​Customers who are using exchanges for purposes which they are not meant for are just putting themselves into unnecessary risk which could have been avoided.

The the majority of the time, if banks want to collapse, Federal will always come in to bail them out, but it's an entire different case for exchanges, especially if the damage is higher than what they have under insurance.

[retaur]

Banks are regulated, centralised exchanges, for the most part aren't.

If you use a centralised exchange with futures trading and actively trade futures, you'll be a victim of their manipulation (they have to quote different rates and liquidate you algorithmically because if they didn't they'd be the ones overleveraged - the market moves to quickly for centralised perps to be sustainable). Decentralised margin and futures, however, gives you far more advantages and that's just another reason to not use a centralised exchange.

Even when things go in their favour, a lot of them exit scam. MT GOX and FTX are famous for their roles in crypto exchanges that have gone under (Celsius too) but it's because they've had some level of executive accountability, traceability and fund return. Many other exchanges are not that fortunate and have just vanished with user funds without a trace (those sites I mentioned before were a lot bigger though so the additional attention to them was valid and explainable by that too).

[God Of Thunder]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

How else do you think they make money? They don't make money from your tarding fees. They use our funds to invest in new products, develop their own products, and even lend money to individuals, just as banks do. However, I believe the exchanges are far superior to the banks today. The exchanges do not ask you why you are withdrawing your funds or what you plan to do with them. The banks are terrible; they ask for additional KYC when you withdraw your own funds.

It is never recommended to keep large funds on centralized exchanges. Only keep the money that you can afford to lose. Unfortunately, I myself started keeping some funds on centralized exchanges lately and I think I should change my habbit asap.

[Darker45]

I wouldn't know, but most probably. If so much of the cryptocurrencies circulating are going their way, they must feel happy.

At the same time, however, they must also feel the weight of the responsibility that comes along with it. The money deposited aren't theirs. It's now their responsibility to protect it, to make sure the security is always enough to keep it safe from the most brilliant and advanced of hackers and all kinds of attackers.

Whereas with banks, the money is insured. And if something terrible happens, the government might even bail them out. The government has their back.

[JeffBrad12]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

Its not because many of them want to, but because they don't know better. Some exchange have emergency fund in the case of collapse but we all know they can still pretty much collapse.
The thing is some people don't really care about self custody and thinks if the exchange somehow collapse the regulation will cater to their needs and help them not knowing that's not the case with the previous CEX collapses.

[Alpha Marine]

I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

Of course, they're happy. The more customers they have, the more money they have to do business with. Why do you think they advertise their services so much and even try to whitewash it as "better than a non-custodial wallet"? The way a banker will smile from chin to chin when they bag a new customer who has so much money to put into the bank, is the same way an exchange will smile when a new customer leaves his coins on their exchange.

CeX and banks are almost the same thing in but in different fields. One is a bank to fiat currencies, while the other is a bank to cryptocurrencies. They may not offer the exact same service, but they're the same things. I might even go out on a limb to say the banks are safer, and this is because banks are more regulated, and they are always bailed out by the government whenever they mess up, so that customers' funds can be protected, but I can't say the same for exchanges.

[Webutxo]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

When customers begin to move their money out of the exchange, the owners of the exchanges will fee something is off that they are not doing right. Even in real life, not everyone keeps their money in banks. Many business mogul keep cash especially if they want to avoid tax or maybe they deal with cash every day, banks looks for a way to bring those people to their premises through marketing units, it's their job and I believe centralized exchanges has this options too.

Almost all if not all coins in every exchange, 90% of them don't belong to the exchange, it belongs to customers but since some people preferred custodial services, they don't mind using personal wallets and they are okay with it.

[bettercrypto]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

If we look at banks and CEX (Centralized Exchange) platforms, they implement the same system, and both are regulated under the government. That's why it's not surprising
that they require KYC (Know Your Customer) from anyone who uses their platform.

When we deposit into a centralized exchange, that means we are giving them the authority to hold the assets we put into their platform, but they can freeze
or hold our funds anytime they wish. The only difference is that the assets we hold in a CEX are volatile compared to fiat currency.

[mindrust]

If the cex has licensed in your country, then yes, it kind of feels like a bank because when they lock your account for whatever reason, they’ll have to release your funds in a reasonable timeframe since they know you can sue if hem if they don’t.

It is different when the exchange has no office in your home country. They are not bound by the law of your country and then they have more leverage on you.

Either way they suck.

Crypto is crypto when it is decentralized.

[traderethereum]

They are happy if their customers keep their coins on the exchange. But we don't know what the exchange will do with the coins. As customers, we must be careful doing this because no one can know what will happen to the exchange. We read many bad news stories about the hack on the exchanges so we need to be careful when storing our coins there.

It is better we keep our coins in our private wallet so we take the responsibility and will protect it. Besides that, if something terrible happens to the exchange, our coins is safe in our wallet.

[Fortify]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again. Many coin owners don't think about it but they peacefully save so much money on centralized exchange. Anyways that is not the case here, I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

I would say that exchanges take even greater care when it comes to security, because if anything goes wrong there is no chance of getting money back. If a bank gets hacked, there is no mass way to move funds to untraceable accounts on a large scale like there is with hot/cold wallets commonly used by exchanges. They are also not backed by any sort of government guarantee, which was designed to prevent a run on a bank if customers become uncertain - people will just abandon it for another exchange. So yes, they have great interest in protecting customer assets but they don't necessarily have the same ability as banks to earn additional money from deposits either.

[rat03gopoh]

I was wondering, despite the risk of keep our money on centralized exchange, so many crypto owners and users still prefer to keep their money on centralized exchange not minding the risk of what if the exchange develops an issues overnight or get hacked overnight and they can't get access to their money again.

Yes, it's somewhat similar.
However, the risk claims aren't as flexible as keeping money in a local bank and require higher fees because your favorite CEXes may not operate under your jurisdiction's laws.

I was wondering if centralized exchanges also feels happy seeing that their customers keeps their money on the exchange just as banks are happy to see big customers save big  amount of money in their banks savings account while the bank use the money to do business and get more profit unaware to the saver.

Internal liquidity, obviously, but I don't know exactly what goes on behind the scenes. I think it's relevant to the level of trust with partners and even regulators. We can learn from FTX how users' money is used for their business.