CeDeFi: The Crypto Ecosystem's Swiss Army Knife

CeDeFi: The Crypto Ecosystem’s Swiss Army Knife

As the excitement around trustless protocols and high-yielding decentralised finance (DeFi) products swept through the crypto community, investors eagerly embraced the possibility of a revolutionary upheaval in traditional finance.

DeFi’s rapid expansion has attracted billions of dollars in investments thanks to its wide range of innovative financial products. However, the fast-paced expansion of DeFi has also brought its fair share of risk. The lack of proper security measures and vulnerabilities in smart contracts has only exacerbated these issues, leaving DeFi exposed to the ever-present threat of hackers and scams, who have stolen a record of over USD 3 billion from exchanges and DeFi protocols in 2022 alone[1]. Now, the current bear market has only added to investors’ woes, as they struggle to navigate the rocky landscape of DeFi.

But centralised finance (CeFi) is not the answer

While DeFi has its own set of challenges, CeFi is far from perfect. The lack of transparency in CeFi entities has led to many issues of bad practices and abuse that have cost investors billions of dollars. Even worse, these companies often operate under a veil of secrecy, only revealing their true nature after the damage has been done.

Both CeFi and DeFi entities have their flaws, so it is important to consider how we can harvest the most valuable components from both systems. By analysing their strengths and weaknesses, we may be able to create a financial system that is both transparent and secure, offering investors (and companies) the best of both worlds.

Put two and two together

Centralised decentralised finance (CeDeFi) is a new approach to leveraging the power of DeFi technology with the governance structure of CeFi. CeDeFi platforms provide a centralised interface for accessing and managing DeFi protocols, making it easier for users to take advantage of the benefits of DeFi without having to navigate the complexity of its underlying protocols.

CeDeFi platforms offer access to DeFi products, such as lending, staking, yield farming and decentralised exchanges (DEX), to name a few. Here are 5 key characteristics that a CeDeFi platform might have:

  • Hybrid structure: They have a hybrid structure, with some elements of the platform being centralised and others being decentralised. For instance, the platform might have a centralised order matching system, but use decentralised smart contracts to facilitate trades and manage funds transparently
  • Interoperability: They are designed to be interoperable, allowing users to easily move assets between the platform and other financial systems, like traditional banks, crypto lenders or decentralised exchanges (DEX)
  • Improved accessibility: They aim to make it easier for users to access crypto and financial services, by providing a user-friendly interface and simplifying complex financial processes
  • Enhanced security: They prioritise security and aim to protect users’ assets and information from unauthorised access or tampering. This could be achieved through a variety of measures, such as using secure encryption protocols and implementing robust risk management systems
  • Increased efficiency: They aim to increase efficiency by streamlining financial processes and reducing the time and cost associated with conducting financial transactions using blockchain and smart contracts

For instance, traders can use CeDeFi platforms to filter out the best options for trading fees, liquidity needs, and KYC conditions, whereas institutions can gain access to innovative DeFi products while still following traditional financial rules and regulations.

Managing the risks of DeFi – a necessary trade-off?

As DeFi continues to disrupt traditional financial systems, CeDeFi platforms are emerging as a new breed of financial intermediaries. They provide users with access to innovative and borderless financial instruments, like stablecoins and DEXs, but they also offer the control, regulatory compliance, and investor protection measures that are often lacking in pure DeFi systems.

That said, in jurisdictions where cryptocurrency is legally recognised, CeDeFi providers are obligated to protect their customers’ funds as mandated by the law. If something goes wrong, such as a hack or market collapse, CeDeFi platforms would be legally liable[2]. This added level of protection can be especially reassuring for investors who are wary of the inherent risks associated with DeFi.

Moreover, because CeDeFi platforms depend on the health and stability of these protocols, they are highly selective about which ones they choose to integrate with. This ensures that only the best and most reliable protocols are being used which minimises risk exposure and helps prevent users from scams. This makes CeDeFi platforms a trusted and secure choice for participating in the crypto ecosystem. Here’s how they compare:

Moving forward cooperatively

As the DeFi space continues to evolve, it is important to ensure that smart contracts are thoroughly audited and secure[3]. This is especially the case for things like cross-chain bridges, where connecting two networks with large sums of funds hinge on just a few lines of code. This means vigorously testing for errors, bugs and vulnerabilities from the source code itself. Encouragingly, there are steps that can be taken to mitigate these risks.

Collaboration between DeFi stakeholders and third parties (like auditing firms) will be essential for building a secure and stable CeDeFi-based ecosystem. By pooling their knowledge and resources together, the industry can provide the necessary guidelines and expertise needed to create reliable code, reducing the risk of vulnerabilities and hacks.

As DeFi is still in its early stages, every chance to improve its underlying technology is valuable in helping its ecosystem flourish and become more robust. This will also be key to building a solid foundation of security and stability for the broader crypto ecosystem.

Working towards a strong and stable future

With its decentralised and open approach, DeFi is disrupting traditional financial systems, offering a range of benefits such as transparency, accessibility, and efficiency. However, DeFi also has its own set of challenges, including security vulnerabilities, liquidity risks and a steep learning curve for many users.

CeDeFi brings together the best of both worlds, offering the efficiency and transparency of DeFi and the usability of CeFi, all while operating within the framework of existing laws and regulations. Sure, they may sacrifice some degrees of decentralisation in the process, but the trade-off is worth it for the peace of mind and convenience they bring.

As recent events such as the FTX collapse, DeFi hacks, and other adversities throughout 2022 have shown, it is clear that CeFi and DeFi have a role to play in the world of crypto. But by embracing CeDeFi, we can create a system that is both realistic and productive for the future, recognising the value of heritage while also adapting to the changing times and harnessing the power of crypto innovation and blockchain technology.


To be the first to get the latest news on Sygnum and the market, expert insights and industry research please follow us on Linkedin and Twitter.

[1] 3 billion stolen in crypto heists here are the eight biggest, Forbes, December 28, 2022.

[2] When trust dies mistrust blossoms: is proof of reserves a step towards rebuilding industry trust?, Sygnum Bank, December 21, 2022.

[3] CeFi vs. DeFi: Everything you need to know, Beincrypto, November 22, 2022.

Disclaimer: The information in this publication pertaining to Sygnum Bank AG (“Sygnum”) is for general information purposes only, as per date of publication, and should not be considered exhaustive. This publication does not consider the financial situation of any natural or legal person, nor does it provide any tax, legal or investment advice. This publication does not constitute any advice or recommendation, an offer or invitation by or on behalf of Sygnum to purchase or sell any assets. No elements of precontractual or contractual relationship are intended. While the information is believed to be from accurate and reliable sources, Sygnum makes no representation or warranties, expressed or implied, as to the accuracy of the information. Sygnum expressly disclaims any and all liability that may be based on such information, omissions, or errors thereof. Any statements contained in this publication attributed to a third party represent Sygnum‘s interpretation of the data, information and/or opinions provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. Sygnum reserves the right to amend or replace the information, in part or entirely, at any time, and without any obligation to notify the recipient of such amendment / replacement or to provide the recipient with access to the information. Simultaneously, there is no obligation of Sygnum to inform recipients of information, if before provided information later becomes outdated, inaccurate or obsolete, unless otherwise provided by applicable law. The information provided is not intended for use by or distributed to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Sygnum does not hold the necessary registration, approval authorisation or license. Except as otherwise provided by Sygnum, it is not allowed to modify, copy, distribute or reproduce, display, license, or otherwise use any content for commercial purposes.

Read next article

Contact Sygnum Singapore

I am a
Submit Mandatory fields

Local restrictions – Provision of cross-border services

It looks like you are using a computer with an IP address located outside of Switzerland.
If you are located in Switzerland, please click “Continue” to access the Sygnum Bank AG (Sygnum) website.

If you are not located in Switzerland, please read below.

This website and the information contained herein are addressed solely to persons residing or domiciled in Switzerland.

Sygnum is a regulated bank supervised by the Swiss Market Financial Authority (FINMA). The products and services on this website are authorised in Switzerland. Sygnum cannot promote its products and services in other countries where it is not authorised by the supervisory authority of that country to do so.

If you click on “Continue” to visit this website, you confirm that you have read and understood the above and you are visiting this website on your own initiative without any active promotion or solicitation from Sygnum.

Investor qualification

The following content is available to qualified investors. Please confirm your details below to visit this page, or please see our other digital asset updates here.

Security alert

Stay alert to fraudulent communications. Sygnum will never post messages on social media or private messaging applications regarding e-banking access or logins. If you have concerns, contact us.