Centralized (CEX) and decentralized (DEX) cryptocurrency exchanges serve as primary gateways into the crypto and Web3 ecosystems. Users rely on them for buying, trading, and securing digital assets. Compliance with financial and crypto regulations is critical to ensure user safety and asset security. This guide explores the legal frameworks, licensing requirements, and structuring strategies for launching compliant exchanges.
Key Differences Between CEXs and DEXs
Custody of Assets
- CEXs: Users transfer assets to custodial wallets controlled by the exchange, akin to traditional banks.
- DEXs: Users retain full control via non-custodial wallets, while protocols autonomously facilitate transactions.
👉 Learn more about wallet custody types
Legal Structuring Approaches
Centralized Exchanges (CEX)
CEX operators assume fiduciary responsibility for user assets, necessitating:
- Licenses: Crypto-specific (e.g., Gibraltar DLT License) or fintech (e.g., EMI License).
- Compliance: KYC/AML procedures, cybersecurity policies, and regular audits.
- Personnel: Appointment of AML officers and qualified managers.
Decentralized Exchanges (DEX)
DEXs typically operate via Decentralized Autonomous Organizations (DAOs) like Uniswap DAO. Legal structuring often involves:
- Development Lab (DevLab): Handles protocol development.
- Token Distribution Entity (TokenCo): Manages tokenomics.
- DAO Legal Wrapper: Foundation structures to limit liability (e.g., Swiss Foundation).
Regulatory Landscape for CEXs
Mandatory Frameworks
| Regulation Type | Examples |
|---|---|
| AML/CFT | FATF Recommendations, EU AMLD5 |
| Crypto Licenses | Cayman Islands VASP, ADGM FSRA |
| Fintech Licenses | US Money Transmitter, UK EMI |
Upcoming Changes
- MiCA (EU 2024): Stricter token listing rules.
- OECD Crypto Tax Framework: Mandatory transaction reporting.
Starting Your Exchange: Key Steps
- Define Business Model: Custodial (CEX) vs. non-custodial (DEX).
- Jurisdiction Analysis: Align with favorable crypto regulations (e.g., Estonia for AML).
- Compliance Blueprint: Draft policies for AML, cybersecurity, and governance.
- Legal Entity Setup: Engage experts for cross-border structuring.
👉 Explore jurisdiction-specific licensing
FAQs
Q: Do DEXs need licenses?
A: Most DEXs avoid custodial licenses but may require DAO wrappers for liability protection.
Q: What’s the biggest regulatory risk for CEXs?
A: Non-compliance with AML laws, leading to fines or shutdowns.
Q: How does MiCA impact exchanges?
A: Mandates stricter token vetting and reserve audits for CEXs.
Disclaimer: This guide is informational and not legal advice. Consult professionals for project-specific compliance.