How to Setup your Own Cryptocurrency Exchange Business: A Complete Guide
Cryptocurrency exchanges are deemed one of the most profitable businesses in the crypto world. The popular Binance exchange, which was launched in 2017, brought in $78 million in profits in first quarter of 2019. Impeccable success of Binance, and other exchanges, has encouraged businesses and individuals worldwide to build their own cryptocurrency exchange platforms.
A question doing the rounds of cryptocurrency market is how to start your own cryptocurrency exchange?
Different things need to be taken care of during cryptocurrency exchange software development. Understanding these will not only guide you on how to setup your own cryptocurrency exchange but also help in the smooth execution of the process.
The jurisdiction under which you plan to register your business is an important consideration, and it must be taken into account during the early stages. Different countries have different laws applicable to crypto market; the location of your business will help you determine the rules and regulations that your business needs to follow.
Besides, taxation is another big factor that should be considered before registering a business as different corporate tax structures will impact your after-tax business bottom line differently.
Local Rules and Regulations
After finalizing the location, you must do in-depth research on all regulatory requirements that your business needs to fulfill. It is more likely that you might not be aware of all the local laws, which is why it is recommended that you consult a legal expert who is well versed with the legal terms and can guide you through the process.
A legally compliant exchange builds credibility with people and is more likely to attract more users.
Important things to be considered include:
- KYC (know your customer)
- AML (anti-money laundering)
Creating a system that complies with all the rules and regulations for both your business and your customers requires some additional efforts, but it is a seed that you plant during an initial stage and enjoy its fruits later.
Software Features and Modules
A cryptocurrency exchange is integrated with different modules that work in sync to meet the needs of the users. These comprise of a user interface, trading engine and a wallet. They are important as the user interacts with the exchange using all of these.
Besides, a cryptocurrency exchange includes an admin panel. Although a user does not have access to admin panel, it is extremely essential for exchange owners. The admin panel empowers the Admin to take control over certain parts of the exchange, including:
- Approval of user accounts
- Cryptocurrency listing
- Trading pairs
- Fee structure of the platform
There are three options for cryptocurrency exchange software development, including:
- Creating an exchange from ground zero with a team of developers
- Using an open-source software
- Building a white label exchange
If you ask how to start your own cryptocurrency exchange while saving time and money, the best way would be white label crypto exchange development.
White label solutions provide a market-ready product which can be easily customized (by incorporating color theme and logo) according to a company’s branding. Furthermore, white label software assures faster deployments, while saving both time and money.
Partnership with Financial Institutions
If you are planning to build a fiat-to-crypto exchange, to allow your users to buy crypto in exchange for fiat currency, you will have to partner with a financial institution — such as a bank or a payment processor. A successful partnership will facilitate fiat-to-crypto transactions for your exchange.
It is important and beneficial to partner with a financial institution that offers fast processing, clearance and settlement times, and has a positive outlook towards cryptocurrency business.
Exchanges with poor security measures are more vulnerable to hacks. Bitpoint, a Tokyo-headquartered cryptocurrency exchange lost USD 32 million as a result of the security breach that occurred due to unauthorized access to private keys of its hot wallet.
Such types of losses are detrimental to both exchanges and users. To avoid such consequences, it is crucial to build an exchange reinforced with the best security features. Emphasize security right from the beginning of the project and constantly update it to eliminate any vulnerability within your code.
In addition, make sure that users’ data on your exchange is kept secure because if exposed, it may increase the chances of crypto theft.
Liquidity is one of the crucial aspects of running a successful cryptocurrency exchange. High liquidity means having a large pool of assets to quickly fulfill users’ buy and sell orders. The question that may come to most people’s minds is — how to start your own Bitcoin exchange with high liquidity.
Although it is difficult for an exchange that has been recently launched to generate sufficient liquidity, there are a couple of solutions that can be leveraged for high liquidity.
First, you can use APIs that can connect your exchange with other bigger, popular and established exchange platforms to achieve greater liquidity. Second, you can join an exchange network. Such exchange platforms utilize trading activity of all exchanges within the network to calculate liquidity. This can offer an advantage to your exchange.
Cryptocurrency exchange platforms are one of the best ways to make profits in the crypto market. However, given a large number of exchanges in the market today, it is important to make your exchange stand out. A legally compliant exchange underpinned by multi-layer security, high liquidity and ease-of-use can help you gain an essential competitive edge and thrive in the cryptocurrency market.
If you are wondering how to start your own cryptocurrency exchange, Antier Solutions can help. Our blockchain experts, with in-depth domain knowledge and rich experience, can not only guide you on how to setup your own cryptocurrency exchange but also deliver diligently crafted development solutions to navigate your crypto exchange journey. Whether you want to build your exchange from ground zero or leverage white label exchange development solutions, we have got you covered. We offer customized solutions to help you accomplish your business goals and reinvigorate your business for long term success.