A lot of people daydream about having their tokens listed and traded on centralized exchanges such as Binance, OKEx, Huobi, etc. The thought of higher visibility and price perks is hard to ignore. However, most probably don't realize what all it entails to get a token listed on these centralized exchanges.
When dealing with a decentralized exchange, obviously transactions are taken care of without any intermediaries. In fact, on a decentralized platform anyone with some knowledge of a smart contract can create a token and get it trading, usually without any investors involved.
Conversely, getting a token listed on a centralized exchange (Cex) can be relatively challenging due to the specific policies and procedures in place at these exchanges. This is one of the reasons why rug pulls tend to happen in decentralized finance (defi) and not centralized exchanges.
If you are attempting to list your token on a big centralized exchange, there are several principles you need to consider.
What Centralized exchanges look for
1. Tokens Must Be Product and Blockchain Technology Driven**
While gaining approval to be listed on a centralized exchange is more of a protocol than a process, it has to be a blockchain project and follow a product rationale. In other words, it must involve decentralized ownership, have a smart contract in place and include a set of tokenomics.
Decentralized ownership is important because, in order for a token to be of any interest to the public, the creator must not take ownership of the token, and this should be part of the smart contract. This is actually the "fun" part of Decentralized ownership, with tokenomics indicating if the token has some basis for being, a plan for existing beyond its current life cycle, and cases for use or utility. A good token will have a serious plan for adoptable growth.
Token that primarily satisfied this condition are likely to be qualified for listing
or at least considered for listing on centralized exchange.
2. Community Relatedness
The quality of a token's community can have a strong influence on whether it gets on-boarded to a centralized exchange platform. A token becomes more popular once the users or community members are excited about the token and advocate for it highly often. This excitement shows more long holding or long term investor type of participation than that of short term or speculative investors.
One metric of a community's strength is how that community reacts to a negative criticism or negative FUD (fear, uncertainty and doubt). A community that is passionate and all-in on their project has a much better chance of being listed compared to a community divided.
Tokens that are essentially "airdrop" communities tend to not get as much traction with centralized exchanges. Projects with airdrops or projects that only mine, spend a lot of time in the back of the line when it comes to exchanges considering listed. Consequently, the community strength evaluation is essential for getting tokens listed on centralized exchanges.
3. The Vision of the Founder and Team
Another important consideration is the vision of the founder and the team of the token. Are they in it for the long haul, or are they planning to pump and dump? Exchange operators will always evaluate the commitment and integrity of project owners in their evaluation to list their tokens.
A visionary founder and their project team must be innovative and solution-oriented. They should also serve as the approachable representatives of the project; interacting with the community, making AMAs or community update articles by showcasing their project development and any upcoming changes. Token projects should only be started by people willing to communicate with community members. Some projects even want every founder and team member doxxed, meaning to make it clear who they are and what their engagement efforts will be with the community and the exchange operators who list the project token.
4. Token Project Legal Standing
Getting listed on Centralized Exchanges (CEX) focuses on legal standing. These exchanges will examine the project standing related to law enforcement. Specifically, they will examine Anti-Money Laundering (AML) and Know Your Customer (KYC). Since CEX are under considerable KYC compliance, any project with a token must follow these guidelines if they want to get a token listed.
Securities laws and regulations are another significant aspect of legal compliance. This will change depending on where you are located and the structure of your project. Ultimately, the project will need to register with a securities agency and provide the necessary information to potential investors. Other considerations include Financial Action Task Force (FATF) obligations, data privacy and protection laws, tax compliant laws, and much more.
Taking care of these legal aspects will help shorten the time required to have a token listed on a centralized exchange. When a centralized exchange operator considers whether to list a token they will look at how well a token has been legally compliant.
In conclusion, to avoid any surprises, make sure you understand the process of getting tokens listed on exchanges at the outset before diving into the crypto ecosystem. If you are looking at decentralized exchanges (DEX) then congratulations your legal obligations are considerably less. Token creators can list their tokens on the DEXs themselves and provide the necessary liquidity to trade. However, when it comes to centralized exchanges the token will need to be legally compliant before a centralized exchange will consider listing the token.
Disclaimer: This post is for educational purposes, any action taken based on the information provided in this blog post is solely at the user responsibility.
The image used is AI generated.