CEX Enters DeFi: Strategic Analysis and Future Outlook

Key Points Summary

• Strategic Differentiation: Major exchanges adopt different strategies to enter the Decentralized Finance space. One exchange provides retail-oriented on-chain services, lowering the Web3 threshold. Another exchange launches an independent platform, offering CEX-level liquidity on-chain. There are also exchanges that adopt a dual-track model, catering to both retail and institutional users.

• Reasons for CEX transitioning to on-chain: Early tokens were mostly launched on DEX, and CEX faced listing delays due to regulatory reviews, resulting in lost trading volume and revenue. On-chain services allow them to participate in early token liquidity and retain users before the official listing.

• Future Trends of CeDeFi: The boundaries of platforms are becoming increasingly blurred. Exchange tokens are evolving from fee discount tools into core assets that connect centralized and decentralized ecosystems. Some DeFi protocols may be integrated into larger CEX-dominated networks, accelerating the formation of a merged market.

1. CEX Transitioning to On-Chain: An Opportunity Not to Be Missed

Recently, a well-known exchange launched the DeFi-based listing platform Alpha, attracting market attention. This platform is operated by the exchange team, allowing retail users to access early tokens faster than traditional channels and promoting targeted airdrops through special mechanisms, significantly enhancing token accessibility and participation.

Despite the controversy surrounding this model, the prices of several tokens listed through Alpha plummeted after launch, sparking discussions about the structure and intentions of the program. However, one trend has become clear: centralized exchanges are no longer bystanders in the Decentralized Finance ecosystem, but active participants.

This transformation is not limited to a single platform. Other major exchanges are also actively laying out on-chain businesses. For example, a certain exchange recently announced the launch of a Solana-based Decentralized Finance platform. Another exchange also revealed plans to directly integrate on-chain services into its application. These trends indicate that the exchange industry is undergoing a broader structural transformation.

The key question is: why would centralized exchanges, which have long relied on stable and profitable models, enter the fundamentally volatile DeFi market? This report will analyze the strategic considerations behind this shift and examine the market dynamics driving this evolution.

2. The Current Status of CEX Entering DeFi: What Are They Building?

Before analyzing the strategic motives behind CEX's entry into Decentralized Finance, it is essential to clarify what they are actually building. Although these efforts are often categorized as "CeDeFi"( centralized-decentralized finance), there are significant differences in the specific implementations across platforms.

Major exchanges adopt different approaches in terms of architecture, asset custody models, and user experience. Understanding these differences is crucial for assessing their respective strategies.

2.1 An independent DEX of a certain exchange: providing CEX-level liquidity

The exchange announced on June 14 the launch of a new platform as an on-chain extension of its exchange infrastructure. The main goal is to replicate CEX-level liquidity in an on-chain environment. To this end, a hybrid design was adopted, combining the quote request (RFQ) system with a centralized liquidity market maker (CLMM) model.

The RFQ mechanism allows users to request quotes from multiple brokers before trading, optimizing prices through professional market makers. The CLMM model concentrates liquidity within active trading price ranges, improving capital efficiency and reducing slippage—these are key factors in approximating the CEX trading experience on-chain.

At the same time, the platform maintains decentralization at the user level. Assets are self-custodied through Web3 wallets, and the platform includes a token launch platform for new projects. It also offers yield generation features through its Revive Vault, including Solana staking products.

The exchange's strategic intent with this new platform is to create a parallel liquidity layer for early tokens that may not meet its primary exchange listing standards, allowing these tokens to develop in a more open, community-driven environment. Although the model is structurally similar to other platforms, it distinguishes itself by integrating launch platform features and yield products into a more comprehensive service.

2.2 Another exchange: dual-track strategy targeting retail and institutional users

At the cryptocurrency summit in 2025, the exchange announced plans to integrate DeFi trading directly into its main application, rather than through a separate wallet. The core of this strategy is to provide a seamless user experience. By enabling DEX trading within the core application, users can access and trade thousands of tokens from the moment assets are minted, without leaving the exchange interface.

Although access to Decentralized Finance is possible through independent wallets, the company has launched a key differentiating feature: verification pools. These pools are only open to institutional participants that have passed KYC verification, providing a secure and compliant environment for entities with regulatory obligations.

Ultimately, the exchange has formed a complex dual-track strategy: providing seamless, integrated on-chain access services for retail users while offering a regulated, high-security liquidity venue for institutional users. This allows the company to cover two user groups and maintain a balance between user experience and compliance.

2.3 Third Exchange: Retail-oriented Strategy to Lower the Web3 Threshold

Among major exchanges, this platform is the most retail-oriented. Unlike other platforms that focus on decentralization, this exchange prioritizes ease of use. Its new platform can be accessed directly through tabs in the main app, allowing users to trade without leaving the familiar interface.

Although all transactions are processed on-chain, users interact with the platform through existing accounts without needing to set up a separate wallet or manage mnemonic phrases, greatly lowering the entry barrier for Web3 newcomers.

Although major platforms are moving towards the CeDeFi model, there are significant differences in their approaches. Some target DeFi native users through a fully decentralized architecture and advanced liquidity mechanisms; others adopt a dual-track strategy that serves both retail and institutional clients with differentiated infrastructure; and some focus on driving mass adoption by simplifying the complexities of Web3.

Each exchange is exploring its own trade-offs in asset custody, product planning, and integration depth, collectively shaping the diverse entry points of this ever-evolving CeDeFi ecosystem.

3. Strategic Drivers of CEX Transitioning to Decentralized Finance

3.1 Seize early token opportunities and avoid listing risks

The first reason is straightforward: CEX wants to prioritize the introduction of popular tokens but is unable to launch them quickly enough.

Most new tokens are now issued directly on DEXs, with permissionless listing mechanisms and widespread attention driving rapid trading volume growth. However, due to legal reviews, risk management, or regional compliance restrictions, even when CEXs clearly see user demand, they often cannot immediately list these tokens.

This delay brings real opportunity costs. Trading volume flows to DEX platforms, while CEX loses listing fee revenue. More importantly, users begin to associate token discovery and innovation with DEX rather than CEX.

By launching its own on-chain products, the CEX has created a compromise solution. These new platforms serve as semi-sandboxed spaces: tokens can be traded without going through formal listing channels, yet still remain in a controlled and brand-safe environment. This allows exchanges to monetize user activity early through exchange fees or token issuance mechanisms while maintaining legal distance. Exchanges provide access channels but do not directly hold or endorse these assets.

This structure provides CEX with a way to participate in token discovery while avoiding triggering regulatory liabilities. They can capture liquidity, generate revenue, and guide activities back to their own ecosystem—while waiting for the formal listing review process to catch up.

3.2 Keep users on-chain to avoid loss

The second driving factor comes from user behavior. Although DeFi leads in token innovation and capital efficiency, mainstream users still find it difficult to access easily. Most users are unwilling to manually transfer assets across chains, manage wallets, approve smart contracts, or pay unpredictable Gas fees. Despite these barriers, the most attractive opportunities (, such as new token listings and yield strategies ), are increasingly occurring on-chain.

CEX has recognized this gap and has responded by directly integrating DeFi access into its platform. All of the aforementioned CEX integrations allow users to interact with on-chain liquidity through a familiar CEX interface. In many cases, exchanges completely abstract away wallet management and Gas costs, enabling users to access DeFi as easily as using Web2 applications.

This method achieves two goals. First, it prevents user attrition. Those traders who might turn to DEX can now stay within the CEX ecosystem even while using DeFi products. Second, it strengthens the platform's defensive capabilities. By controlling the access layer and gradually mastering the liquidity layer, CEX has built a network effect that goes beyond spot trading.

Over time, this approach will transform into a user lock-in effect for the platform. As users become more mature, many will seek cross-chain routing, yield products, and trading strategies. If a CEX has its own DEX infrastructure, Launchpad layer, or even a dedicated chain, it can ensure that users, developers, and liquidity are firmly bound within its ecosystem. User activities will be tracked, monetized, and recycled without flowing to third-party protocols.

In fact, on-chain integration allows CEX to control the entire lifecycle of user funds: from fiat deposits, to DeFi exploration, and finally to token listing and exit—all completed within a unified system that can generate revenue.

4. The Future Path of CeDeFi

Large CEXs expanding to on-chain marks an important turning point in the evolution of the cryptocurrency industry. CEXs no longer view DeFi as an external phenomenon, but rather begin to build their own infrastructure, or at least ensure direct access to the user layer.

4.1 Blurred Boundaries: The Rise of a New Trading Paradigm

With the integration of on-chain services by CEX, the distinction between "exchanges" and "protocols" is becoming increasingly blurred from the user's perspective. A user trading on-chain tokens using a certain exchange may not even realize whether they are interacting with a decentralized protocol or a centralized interface. This integration could significantly reshape the liquidity architecture, product design, and user processes of the entire industry.

Institutional behavior will also become a key observation point, but a comprehensive influx of capital is unlikely to occur in the short term. Institutions remain cautious, mainly due to some unresolved risks: regulatory uncertainty, smart contract vulnerabilities, token price manipulation, and opaque governance mechanisms.

The launch of on-chain services by exchanges does not eliminate these structural risks. In fact, some institutions may view the intermediary DeFi access of exchanges as a new layer of intermediary risk. Realistically, early attempts may mainly come from hedge funds and proprietary trading firms, which will deploy small-scale capital experiments. More conservative participants, such as pension funds or insurance companies, are expected to remain on the sidelines for the next few years. Even if they participate, they may adopt an extremely cautious allocation approach—usually not exceeding 1-3% of their portfolios.

Against this backdrop, the prediction of "billion-dollar capital inflows" appears overly optimistic. A more realistic outlook is a gradual testing in the hundreds of millions. However, even these moderate inflows could potentially enhance market depth and alleviate volatility to some extent.

4.2 The Evolving Role of Exchange Tokens

As exchanges continue to expand their on-chain services, the functions of local exchange tokens will also evolve accordingly. Holding a certain amount of these tokens may provide users with discounts on on-chain transaction fees or unlock earning opportunities through staking and liquidity incentives. These changes could introduce new utility for exchange tokens while also bringing new volatility.

Currently, only one major platform provides clear and ongoing utility for its local token, which plays an active role in multiple services. Most other exchange tokens, however, still have functionalities limited to basic fee discounts.

As the CeDeFi infrastructure matures, this situation will change. When exchanges operate integrated on-chain and off-chain platforms, their native tokens will become the link connecting the two domains. Users may need to hold exchange tokens to participate in staking, launch pools, or gain priority access to newly launched projects.