After registering on a centralized cryptocurrency exchange, the next step is to transfer a certain amount of cryptocurrency to the platform so that you can buy, sell, or trade. When interacting with a centralized exchange, you must transfer the required cryptocurrency from your personal wallet to the exchange wallet.

Pay close attention: the exchange wallet!

Although a digital wallet is created automatically inside your exchange account upon registration, you do not have access to the mnemonic phrase of that wallet. This wallet belongs entirely to the exchange.

In reality, when you deposit cryptocurrency into an exchange, the exchange becomes the custodian of your assets. This is why wallets where you personally hold the mnemonic phrase are called non-custodial wallets or self-custodial wallets, while wallets provided by exchanges are known as custodial wallets.

As long as your assets remain on the exchange, you do not have full control over them. If the exchange goes bankrupt or commits fraud—as happened with FTX—you may lose your assets entirely.

Additionally, if the exchange detects any violation, it can freeze your account or block withdrawals. Examples include:

  • Using falsified identity documents
  • Holding the nationality of a sanctioned country
  • Violating the platform’s Terms of Use

Therefore, when using a centralized exchange, custodial wallets are unavoidable—but the associated risks must be fully understood.

A question to think about
Which option do you think benefits an exchange more?

  • Stealing all users’ assets at once and shutting down as a criminal entity
  • Or building trust over time, attracting more users, and generating sustainable profits

Depositing cryptocurrency (Deposit)
Assume you want to deposit 1,000 USDT. Go to Wallets or Assets, select Deposit, and choose USDT.

On the next page, you must select the correct transfer network based on the network used in your personal wallet. As explained in Step 16, a network mismatch between sender and receiver can result in permanent loss of funds.

After selecting the network, copy the deposit address. Then open your personal wallet and send the funds to that address.

On some networks, an additional code called a Memo is required. If this Memo is not entered correctly, the transaction may fail.

Before confirming the transaction, double-check:

  • The wallet address
  • The selected network
  • The network fee

For extra safety, it is highly recommended to first send a small test amount.

Withdrawing cryptocurrency (Withdraw)
After completing your trades, you should withdraw your assets from the exchange to your personal wallet. Keeping assets on an exchange for long periods is strongly discouraged.

To withdraw, go to Wallets or Assets, select the cryptocurrency, and click Withdraw. In some cases, withdrawals may be temporarily disabled by the exchange.

This is why you should always verify withdrawal availability and supported networks before making a deposit.

When withdrawing, choose a network supported by both the exchange and your wallet. Low-cost and widely supported networks such as BEP2, BEP20, Polygon, SPL, and TRC20 are often preferred.

If you want to keep the asset on its native blockchain, make sure to select that specific network and confirm your wallet supports it.

Changing the transfer network
In some cases, you can change a token’s network via the exchange or through wallets that support Swap or Bridge features. For example, you might deposit USDT on BEP20 and withdraw it on SPL if the exchange supports both.

In such scenarios, you will pay multiple network fees, so always compare the total cost relative to the transferred amount.

Some wallets, such as SafePal, also offer built-in Swap, Exchange, or Bridge features.

Swap operations are explained in more detail in Step 21.

Important notes about custodial wallets

1. Never transfer cryptocurrency directly from one exchange wallet to another exchange wallet. If a problem occurs, recovery is complex and may take weeks or months.

Additionally, lack of identity verification or holding a sanctioned nationality can result in frozen assets and international financial investigations.

2. After finishing your trading activities, always withdraw your assets to your personal wallet. True ownership exists only when you control the mnemonic phrase.

Worth Noting

One of the biggest mistakes new users make is leaving assets on exchanges for extended periods. Crypto history is full of exchange collapses and hacks. Understanding the difference between legal custody and actual ownership is essential for risk management.

How AI Helps

AI tools help monitor exchange risk, detect abnormal withdrawal suspensions, and analyze the financial and operational health of trading platforms. AI-powered systems can compare network fees in real time, suggest optimal deposit and withdrawal routes, and detect phishing attempts or incorrect addresses before transactions are executed. Common tools include ChatGPT for guided decision-making, Nansen and Arkham Intelligence for on-chain flow analysis, and AI-based security platforms for operational risk detection.

FAQ

What is the difference between custodial and non-custodial wallets?

Custodial wallets are controlled by exchanges, while non-custodial wallets give users full control through their mnemonic phrase.

Is it safe to keep cryptocurrency on exchanges?

Long-term storage on exchanges is risky due to bankruptcy, hacking, or account restrictions.

Why should I send a test transaction first?

A test transfer reduces risk by confirming the address and network are correct.

What happens if I choose the wrong network?

Funds may be permanently lost due to blockchain incompatibility.

Can I change a token’s network after depositing?

Yes, using supported Swap or Bridge features on exchanges or compatible wallets.

When should I withdraw funds from an exchange?

Immediately after completing your trades and no longer needing exchange custody.