Launching a bitcoin exchange may be your march to fortune. It may turn out to be your machine to mint money for years to come.
However, developing a bitcoin exchange from ground zero is a complex and time-consuming process. A well-chosen team of developers and testers may take more than nine months for building and testing a customized exchange. As for the cost to start a crypto exchange, it depends on a string of factors, including the choice of technology, hosting, legal counsel, registration, initial advertising, and many more. In such a scenario, opting for a white label bitcoin trading platform is probably the most viable option for you.
Let us discuss the key areas where you are likely to incur expenses when building bitcoin exchange software:
License for running a cryptocurrency exchange
Governments across the globe have levied a high fee for granting licenses for running a bitcoin exchange. There are some exceptions though, such as Kazakhstan, which gives the cryptocurrency exchange license at a substantially low fee. Discuss with your crypto exchange developers where you can get the licenses easily and at a lower fee.
Legal counsel to understand legal requirements
Crypto is a highly regulated industry. Moreover, the regulations also tend to change rapidly as crypto is still evolving. In countries like the US and the UK, bitcoin operators must be licensed and have to follow SEC (The U.S. Securities and Exchange Commission) and CFTC (The Commodity Futures Trading Commission) rules. On the other hand, there are a few countries where the regulation has not yet caught up with technology.
A typical regulation worldwide for crypto exchanges is the requirement for them to adhere to Know Your Customer (KYC) as they technically fall into the purview of currency exchange. In the United States, the Patriot Act brought these rules in place since 2002.
Regulation regarding crypto exchanges is complex and only an attorney will be able to handhold you.
You have to compete with other exchanges, so the payment processing service you work with should be efficient. Determine all the details about rates before signing a contract. Inquire with them how long they will take for processing the payments. Their processing system should also comply with PCI DSS to shield you against cyber threats.
Sure, the quicker processing time and compliance come with a cost, but these features are going to play a crucial role in the success of your crypto exchange platform.
Collaboration with a technology solution provider
When you buy bitcoin exchange software, you want it to be bug-free, don’t you? To attain that objective, you have to collaborate with a reliable service provider with a robust track record, which comes with a cost. Make sure they offer turnkey cryptocurrency exchanges, charging a one-time fee sans any commission structures. It will save you from the burden of ongoing fees.
You also need to ensure you receive full source code that you may need for auditing purposes. Not only does auditing of code makes you come across as an important business, but some regulators may also want to inspect the source code. Quality code will eliminate unwanted costs that you may incur later such as a dysfunctional tool, gaps in cybersecurity, etc.
Choosing a white label bitcoin trading platform will decrease your overall cost significantly. Moreover, it will also bring down your launch time to a few weeks rather than a few months.
Networking with other exchanges to enhance liquidity
Your customers will view your exchange with skepticism if they don’t find an order book and trading activity i.e. liquidity. To overcome these issues, you need to link your exchange with other exchanges. Connection with the larger network of exchanges will result in more liquidity.
Any effort to boost liquidity will increase the development work and conversely the costs, yet it is essential for your exchange.
In a bid to reduce costs, some exchange owners make the mistake of hurrying up on security issues resulting in bugs. When developing a crypto exchange, you just cannot bypass security barriers like two-factor authentication and encrypted database. In recent times, crypto exchanges have been the prime target of cybercrime and you cannot let hackers get better of your security mechanism. Who can forget data breaches like Mt. Gox and Bithumb, which were nothing less than carnage for exchange owners as well as unsuspecting customers who had come on the exchange to trade and earn crypto.
For your venture to succeed, you need to be able to find the cost to start a crypto exchange and arrange the capital required. You may not need all the funds upfront, but you should be well-versed with the expenses that would come your way. A common mistake startups make is not to gauge all the possible costs and arrange for these. They fail to plan regular induction of funds to cover the costs of development as well as provide for operational cash until the venture stands on its own.
If you are planning to launch your crypto exchange platform, Antier can help. We provide a white label crypto exchange solution, and at the same time, we can build a custom crypto exchange for you from scratch.
Schedule a free demo of our white label bitcoin trading platform or connect with our subject matter experts to share your business needs.