Perspective by: Ido Ben Natan, co-founder and CEO of Blockaid
For years, centralized exchanges (CEXs) have dictated what people can trade. If a token wasn’t available on major platforms, it was essentially nonexistent for the majority of users. This model may have worked in the early days of crypto, but today, it’s no longer viable.
The emergence of Solana-based memecoins, the success of platforms like Pump.fun, and advancements in AI-driven token generation are resulting in millions of new tokens being created each month.
Exchanges have not adapted to this rapid growth. This has to change. Recently, the CEO of Coinbase highlighted the need for exchanges to transition from an allowlist framework to a blocklist approach, where trading is permitted by default unless a token is identified as fraudulent.
In many respects, this is a pivotal moment for CEXs, akin to Kodak’s inability to pivot to digital photography, which ultimately became a case study in strategic missteps. Now, exchanges are under similar pressure. The traditional methods are not only slow; they are outdated. The pressing question is: What will happen next?
The traditional model is hindering exchanges
CEXs originally aimed to make cryptocurrency feel secure and familiar. They emulated traditional stock markets, meticulously scrutinizing each token prior to its listing. This framework was intended to safeguard users and satisfy regulatory demands. However, cryptocurrency operates differently from the stock market.
Unlike stocks, which entail extensive filing and approval processes before public trading, creating a token can happen in an instant. Exchanges cannot keep pace with this speed. A recent example is the TRUMP coin, which launched on January 17 and saw a rapid increase in value, but by the time it was listed on major CEXs, it had already peaked.
For exchanges, this isn’t merely about improving efficiency — it’s a matter of survival. The foundational rules they operate under no longer align with the realities of the crypto market. To remain competitive, they must undergo a transformation before they are left behind.
CEXs should not oppose DEXs
Rather than clinging to obsolete listing procedures, exchanges ought to welcome the open access offered by decentralized exchanges while preserving the advantages of centralized trading. Users simply want the ability to trade, irrespective of whether an asset is officially “listed.” The most successful platforms will eliminate the need for listings entirely. Simply speeding up the listing process will not suffice in an era that favors open access.
This new generation of exchanges will not only list tokens — they will index them in real-time. Every token created on-chain will be automatically acknowledged, with exchanges sourcing liquidity and price feeds directly from decentralized exchanges (DEXs). Users will no longer have to wait for manual approvals; they will gain access to any asset as soon as it is created.
However, access alone isn’t sufficient — the trading experience must be smooth. Future exchanges will integrate on-chain execution and embedded self-custody wallets, making the purchasing of tokens as effortless as it is today. Features like magic spend will allow exchanges to facilitate transactions on self-custodial accounts on demand, converting fiat into the necessary on-chain currency, navigating trades through the optimal liquidity, and safeguarding assets without users needing to handle private keys or manage multiple platforms.
From the user’s standpoint, nothing will change — but everything will be different. A trader will simply click “buy,” and the exchange will manage all the backend processes. They won’t need to know whether the token was ever “listed” in the conventional sense — it won’t matter.
Security is the main hurdle
Transitioning from an allowlist to a blocklist marks the first step towards a more open-access approach for CEXs. Instead of determining which tokens are tradable, exchanges would only block scams or harmful assets. While this change streamlines trading, it also introduces considerable security and compliance demands. The system will face constant threats, requiring robust protective measures.
Regulators expect CEXs to maintain stricter compliance than DEXs. The removal of manual listings will necessitate real-time monitoring to prevent transactions involving high-risk or illegal assets. Security must be proactive, almost instantaneous, and automated. Open-access trading could pose excessive risks for users and exchanges without this crucial foundation.
The future favors openness
The current operational methods of CEXs are not designed for the future. A manual approval process for token listings cannot scale, and as DEXs gain popularity, the traditional model creates a competitive disadvantage.
The logical progression is to adopt a blocklist approach, allowing all tokens to be tradable by default except those identified as malicious or non-compliant. To survive, CEXs must replace sluggish manual reviews with real-time threat detection, on-chain security monitoring, and automated compliance systems.
The exchanges that successfully navigate this shift — those that embed security into a foundational open-access framework — will usher in the next wave of cryptocurrency innovation. The ones that fail to adapt will find themselves struggling to compete with DEXs while clinging to a model that no longer suits the market.
Perspective by: Ido Ben Natan, co-founder and CEO of Blockaid.
This content is for informational purposes only and should not be considered legal or investment advice. The views expressed are solely those of the author and do not necessarily reflect the opinions or views of any organization.