What is a crypto exchange? How it works, types and fees
A crypto exchange is a platform where you buy, sell and trade cryptocurrencies such as bitcoin and ether, either for euros or for other crypto. Most people use a centralised exchange run by a company, which holds your funds and matches your orders; decentralised exchanges do the same job with smart contracts and no company in the middle. In the EU, every exchange that serves you must hold a licence under MiCA, the EU crypto law.
What is a crypto exchange, in plain words?
A cryptocurrency exchange is a marketplace for digital assets. It brings buyers and sellers together, sets a price from their orders, and settles the trade, so you can buy and sell bitcoin or other cryptocurrencies at the current exchange rate.
Think of it as a cross between a stock exchange and a currency exchange office. On traditional stock exchanges such as Euronext you can’t trade directly: you go through a securities broker. A crypto exchange usually does both jobs at once. It runs the market and gives you an account to trade in, often with a wallet attached.
Many crypto apps are not exchanges in the strict sense. They act as brokers: they sell you crypto at a quoted price and earn the spread. That is simpler, but often more expensive than trading on the exchange’s own order book.
How do crypto exchanges work?
Crypto exchanges work by matching buy and sell orders from many users and settling the trades on their own books. On a typical centralised exchange the process looks like this:
- Open an account and verify your identity. Licensed platforms run KYC checks to prevent money laundering before you can deposit.
- Deposit funds. You send euros (fiat currency) by SEPA transfer or card, or move crypto in from a wallet.
- Pick a trading pair. BTC/EUR means you pay euros for bitcoin; ETH/BTC means you pay bitcoin for ether.
- Place an order. A market order buys straight away at the best available price; a limit order waits until the price reaches the level you set.
- Withdraw. Keep your coins on the exchange, send them to your own wallet, or sell and withdraw euros to your bank.
Behind the scenes, an order book lists all open buy and sell orders. The gap between the highest bid and the lowest ask is the spread. Trading volume matters: higher liquidity means tight spreads and little slippage, while lower liquidity means your order can move the price against you.
Most trades on a centralised exchange never touch the blockchain. The exchange just updates its internal records. Only deposits and withdrawals of crypto are real blockchain transactions, and those carry network fees.
Types of crypto exchanges
There are three main types of crypto exchanges, and the biggest difference between them is who holds your coins.
| Type | Who holds your funds | KYC | Typical user |
|---|---|---|---|
| Centralised exchanges (CEX) | The company | Yes | Beginners and most everyday users |
| Decentralised exchanges (DEX) | You, in your own wallet | Usually no | Experienced users in DeFi |
| Hybrid exchanges | Mixed | Varies | Niche, still rare |
Centralised exchanges
Centralised exchanges are trading platforms run by a company that holds customer funds, matches orders and is answerable to a regulator. They let you deposit euros, offer customer support and usually have the highest liquidity. The trade-off is custody: the company holds the private keys, so you depend on its security and solvency. Hence the saying “not your keys, not your coins”.
Decentralised exchanges
Decentralised exchanges let you trade crypto peer to peer through smart contracts, straight from your own wallet. Most use automated market makers: instead of an order book, users provide liquidity to pools of two tokens, and a formula sets the price. You keep complete control of your funds, but there’s no central authority to help if you approve a malicious contract or send tokens to the wrong address. You also can’t deposit euros directly.
Hybrid exchanges
Hybrid exchanges try to combine the two: centralised order matching for speed, with settlement or custody on the blockchain. They remain a small part of crypto markets.
What services do crypto exchanges offer?
Besides spot trading, most crypto exchanges offer a few extra services, and not all of them suit beginners.
- Spot trading: buy or sell crypto for immediate delivery. This is the core service.
- Recurring buys: a fixed amount, say €50 a month, bought automatically, which spreads your entry price over time.
- Crypto-to-crypto swaps: trade one coin for other cryptocurrencies without going through euros.
- Staking: the exchange stakes coins for you and passes on part of the rewards, minus a commission.
- Derivatives: futures and margin trading. These use leverage, most retail traders lose money with them, and many are restricted or unavailable for EU residents.
What does a crypto exchange cost?
A crypto exchange charges you through trading fees, the spread, and deposit and withdrawal fees. Most exchanges use a maker taker fee model: you pay less when your order adds liquidity to the order book (maker) than when it takes liquidity away (taker).
Here is how the costs add up on a €500 bitcoin buy, using example rates rather than any one provider’s prices:
| Route | Example rate | Cost on €500 |
|---|---|---|
| Exchange order book, taker fee | 0.40% | €2.00 |
| ”Instant buy” in an app, fee plus spread | 1.50% | €7.50 |
| Card deposit on top | 2% | €10.00 |
Then there are withdrawal fees. Moving crypto to your own wallet costs a flat fee in that coin, which can be a large share of a small purchase. Before you start trading, check the full fee page of the platform, not just the headline trading rate.
Is a crypto exchange safe to use?
A crypto exchange is only as trustworthy as the company and the rules behind it. Exchanges have been hacked, and some have failed outright: when FTX collapsed in November 2022, customers found their funds frozen in bankruptcy proceedings.
In the EU, MiCA reduces that risk without removing it. A licensed crypto-asset service provider must keep your crypto assets separate from its own, follow security measures, handle complaints and publish its fees. Since 1 July 2026 only MiCA-authorised firms may serve EU residents. Binance, for example, has no MiCA licence and has stopped onboarding EU users, as our Binance review explains. In the US, exchanges instead register as a money transmitter at state level.
What MiCA does not do is protect you from price volatility, and crypto is not covered by investor compensation schemes. Red flags to watch for:
- No licence you can find in the ESMA register or your national regulator’s register.
- Promises of fixed high returns, or pressure to deposit quickly.
- Support staff who contact you first on WhatsApp or Telegram.
- Withdrawals that are suddenly “delayed” or need an extra fee.
Turn on two factor authentication with an app, use a unique password, and don’t leave more on any exchange than you need for trading. Long-term holdings can move to a wallet you control or to cold storage.
Crypto exchange vs crypto wallet
A crypto exchange is where you trade digital assets; a crypto wallet is where you store them and hold the keys. An exchange account comes with a custodial wallet, which the company controls. A self-custody wallet, such as a hardware wallet, gives you the private keys, so you alone can move the coins and you alone can lose them.
Most people use both: the exchange to buy or sell, and their own wallet for coins they plan to keep.
Related terms
Questions people ask
Can you cash out crypto for real money?
Yes. On a centralised exchange you sell your crypto for euros and withdraw them to your bank account, usually by SEPA transfer. In many EU countries a sale can trigger tax, so keep a record of what you paid.
Is it better to keep crypto in a wallet or on an exchange?
An exchange is convenient for trading but means trusting a company with your coins. A wallet you control removes that risk, but you alone are responsible for your private keys and seed phrase. Many people keep small trading balances on an exchange and longer-term holdings in their own wallet.
Is Coinbase a centralized or decentralized exchange?
Coinbase is a centralised exchange: a company holds your funds, matches orders and runs KYC checks. In the EU it operates under a MiCA licence from Luxembourg; see our Coinbase review.
How do crypto exchanges make money?
Mainly from trading fees and spreads, plus withdrawal fees, card fees and a share of staking rewards. Some also earn interest on customer cash or charge projects to list their tokens.
Which crypto exchange is best for beginners?
For EU residents, a good first exchange holds a MiCA licence, accepts free or cheap SEPA deposits and shows its fees clearly. Our list of the best crypto exchanges for beginners compares the options.