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How to Start A Cryptocurrency Exchange Step-by-Step

Cryptocurrency trading continues to attract a growing number of individuals and companies as potential returns can be substantial in comparison to traditional financial instruments. Since Bitcoin arrived on the scene a decade ago, we have observed a consistently increasing trend as the industry evolves into this exciting and lucrative new sphere.

How to Start A Cryptocurrency Exchange Step-by-Step

In line with these developments, there has been a massive growth in the cryptocurrency exchange business, and with some of the top Bitcoin exchanges reporting considerable revenues, there is no better time than the present to capitalise on this upward trend.

If you have also spotted this opportunity and have thought about starting your own exchange, this step by step guide will help get you started.

How to Start a Bitcoin Exchange in a Few Simple Steps

  1. Seek Legal Advice and Get a Cryptocurrency Licence
  2. Ensure You Are Sufficiently Capitalised 
  3. Connect With a Liquidity Provider
  4. Partner with a Payment Processor
  5. Implement Watertight Security Practices
  6. Conduct Live Beta Testing

1. Seek Legal Advice and get a Cryptocurrency Licence

It is important to seek legal advice in the first instance to ensure crypto licencing requirements are met. The correct licence will be required for all jurisdictions where your company plans to operate. Many cryptocurrency exchanges currently operate with little oversight, but others have taken a tougher stance and have to adhere to stricter regulations, such as the US. Exchanges must also comply with Know Your Customer (KYC) regulations to counter money laundering. Hence, as regulations vary by jurisdiction, it is wise to consult with a lawyer familiar with the industry so you know where you stand.

2. Ensure You Are Sufficiently Capitalised

Before embarking on your project, you should be aware of the costs involved. There are many factors that need to be considered, but most importantly, you need to estimate the costs and time associated with developing, maintaining, and continually upgrading the software in-house.

Developing cryptocurrency exchange software from scratch can be very costly and can take around a year or two to complete. Taking into account the salary of your developers, their experience and the functionality you wish to incorporate into your exchange, this option can set you back around the $500,000 mark. Although this may not all be required up front, it is important to ensure the venture has access to sufficient capital to set up and maintain an exchange.

3. Connect With a Liquidity Provider

The key to a successful exchange is liquidity. Potential clients will not take you seriously without an order book and trading activity. This can be an issue in the early days and has prompted some new exchanges to simulate activity via dummy accounts. However, it is recommended to use a reputable cryptocurrency liquidity provider with a large network of existing exchanges for this purpose so as to enhance your liquidity. The larger the network of exchanges, the less liquidity will be an issue for your new exchange.

4. Partner with a Payment Processor

Payment processors differ in terms of fees and it goes without saying that you will need the lowest transaction rates available in order to be competitive with other exchanges. Other differences between processors include settlement time and PCI DSS compliance and a set of best practices to ensure cyber security while safeguarding your new enterprise against cyber threats. Ideally, you should integrate a cryptocurrency payment gateway to allow crypto transactions to be processed for your users. 

5. Implement Watertight Security Practices

Cryptocurrencies are a big target for cybercrime and hacking, leaving exchanges susceptible to crimes which can be detrimental to a business. Security aspects are a big differentiator between exchanges so it is important that you implement the best practices to ensure that your clients’ funds are safe. These can include a three-level system of cold, warm and hot wallets, multiple security layers including two-factor authentication, anti-phishing features and database encryption.

6. Conduct Live Beta Testing

After building your exchange and going through all the necessary steps described, including setting up a contract with a payment processing firm and checking that all the correct measures are in place regarding security and regulatory matters, it is time to test your exchange’s full range of capabilities in beta. The experiences of your exchange’s early users can then be communicated back to the developers who can make any final changes before launching for real. This will also provide a preview and possibly create some media buzz for the final version.

Next Steps

These stages summarise the steps required to get your cryptocurrency exchange up and running. However, it is important to remember that although this should assist you with an action plan for getting started, no step-by-step guide can prepare you for all eventualities that might arise when you start your business.

For this reason, many people prefer to avoid the expense and hassle of starting from scratch by opting for white label exchange software which has already been thoroughly tested and proven to work. A big advantage of using a white label is that you save yourself the trouble of dealing with technical requirements, implementation and ongoing maintenance. Furthermore, you pay significantly less for a licence compared with developing it on your own.

A white label, or turnkey solution is also ideal for companies lacking a key components like crypto liquidity or the trading engine which might not be feasible options. 

B2Broker Exchange Turnkey & Cloud Solution

B2Broker offers a cryptocurrency exchange turnkey solution which enables a cryptocurrency exchange to be up and running within one month.

Some of the key services offered by B2Broker besides the white label platform itself are the legal framework, access to various platforms including B2Trader, access to our industry-renowned liquidity (top 10 liquidity provider), integration with B2BinPay, and lots more. Furthermore, the solution is completely customisable, making it an ideal, quick and cost-effective solution for setting up a cryptocurrency exchange. 

Our cloud solution meanwhile, is suitable for IB companies. Full branding of all systems allows you to work under your own brand executing customer orders on B2BX Exchange servers without any significant costs for maintaining the technical infrastructure.

Getting Started

A large number of companies have chosen B2Broker’s cryptocurrency exchange turnkey and cloud solutions to provide a quick, cost-effective solution and are now running successful, revenue-generating businesses. Click here to get started.

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