How The Crypto Community Got Divided Into Two Halves: CeFi Vs. DeFi – Forbes

There are two halves of the financial system from a crypto enthusiast’s perspective — traditional finance and cryptocurrency finance. But the crypto space now has two subspaces — centralized finance (CeFi) and decentralized finance (DeFi). Here’s how the divide happened.

One of the original ideas behind cryptocurrency is to have a wholly peer-to-peer network that doesn’t need centralized intermediaries such as financial institutions. Events played out differently in reality, however.

First, there are two ways to own crypto. You either receive payments in crypto or exchange government-issued money, such as the dollar for it. Most people enter the market via fiat gateways, and that complicates things — at least concerning the idea of circumventing financial institutions. Most countries have anti-money laundering regulations, which makes financial service providers responsible for preventing the illicit use of their platforms.

Consequently, services that allow people to exchange fiat money for crypto became subject to existing regulations. There’s a