Decentralized exchange (DEX)

A company that is paid in a euro stablecoin and owes a supplier in a dollar stablecoin needs a conversion, the onchain version of an FX trade. On a DEX the payer swaps one token for the other from a self-custodied wallet, and the trade settles in the same block. There is no cut-off time and no correspondent bank in between.

Société Générale's digital asset unit took this route. SG-FORGE opened a spot market for its euro token EURCV and its dollar token USDCV on Uniswap, with the market maker Flowdesk providing liquidity, and lending markets for both tokens on Morpho. The stablecoin payments page covers the payment flows around such a swap, and euro stablecoins compares the euro tokens a treasurer can choose from.

An exchange such as Xetra matches buy and sell orders in an order book. Most DEXs work as an automated market maker (AMM) instead: a liquidity pool holds reserves of two tokens, and a formula sets the price from the ratio of those reserves. Uniswap's documentation describes the constant product rule, x * y = k: the product of the two reserves must stay the same or grow after every trade. A large order compared with the pool's depth moves the price more than a small one, which a trader sees as price impact.

The reserves come from liquidity providers, who deposit both tokens and earn the swap fees of the pool. Uniswap v3 let them concentrate their deposit in a price range, and v4 added hooks, code that a pool can run before or after a swap. A DEX aggregator splits one order across several pools to reduce price impact. The answer on liquidity pools and the answer on order books explain both market models.

On a centralized exchange the operator holds client assets, runs the matching engine and answers to a supervisor. On a DEX the firm keeps its own keys, signs each trade and deals with a pool whose counterparties it does not know. The control work moves to the firm: it secures its wallets and approves each smart contract it trades with. Anti money laundering screening of the tokens it receives stays with the firm as well.

A swap sent to the public mempool can be seen before it is confirmed, so another party can trade ahead of it. This is maximal extractable value (MEV), and it turns into a cost for the firm that placed the order. Private transaction routing and a tight slippage limit reduce that cost; the DeFi risks page lists the other risks a DEX user takes on.

The EU's crypto regulation MiCA covers crypto-asset service providers, firms that operate a trading platform, exchange crypto-assets for funds or hold them for clients. Recital 22 states that services provided in a fully decentralized manner without any intermediary fall outside its scope. Whether a given DEX is fully decentralized depends on who controls the front end, the upgrade keys and the fees, and supervisors look at each case. A firm that offers DEX access to its clients through its own app is a service provider in its own right and needs the CASP license.

ESMA's report on DeFi in the EU found serious investor protection risks in DeFi, including new forms of market manipulation, and limited risks to financial stability because of the sector's size. The DeFi in Europe page follows the EU's work on the topic.

The German Blockchain & AI Week 2025 in Berlin, which Finance Loop supported, had a panel on DEX vs CEX. Finance Loop's partners DeFiAM Labs in Zurich and the Multichain Asset Managers Association work on DeFi for banks and asset managers. Finance Loop brings people from bank treasury and compliance together with DeFi builders at events in Frankfurt, Munich, Berlin and Hamburg.

It is a trading application made of smart contracts on a public blockchain. Users swap tokens from their own wallets, and a formula or an onchain order book sets the price. No operator holds client assets.

A centralized exchange (CEX) holds client assets, matches orders on its own servers and is licensed under MiCA as a crypto-asset service provider. A DEX settles each trade onchain from the user's wallet. The answer on DEX vs CEX compares fees, custody and rules.

Some do, for their own tokens. SG-FORGE of Société Générale lists its stablecoins EURCV and USDCV on Uniswap, with Flowdesk as market maker, so holders can convert between the euro and the dollar token onchain.

MiCA excludes services provided in a fully decentralized manner without an intermediary. A company that runs a DEX front end, controls the contracts or offers DEX access to its clients can still fall under MiCA or other EU rules.