CeFi Risks

Definition ∞ These are the potential dangers and vulnerabilities associated with centralized financial entities that handle digital assets. Such risks include counterparty failure, operational disruptions, regulatory interventions, and the loss of user funds due to mismanagement or insolvency. These entities, while offering traditional financial services, are subject to unique digital asset-specific challenges.
Context ∞ The ongoing examination of CeFi risks is paramount following recent market events that highlighted the fragility of some centralized platforms. Key areas of concern include the solvency of exchanges, the transparency of their reserves, and the regulatory compliance status of their operations. Investors and users must remain vigilant regarding these exposures when engaging with centralized digital asset service providers.