As the global demand for digital currency trading rises, operating a cryptocurrency trading platform can offer excellent business potential. Are you interested in establishing a Bitcoin exchange? Our research shows that the best way to launch a crypto broker is by utilizing a pre-made, open-source, white-label products. This article will discuss the advantages of starting a cryptocurrency exchange, the risks to consider, and the steps required to operate a cryptocurrency exchange.
Should I Start A Crypto Exchange?
With global interest in digital currencies at an all-time high and investors rushing to acquire Bitcoin on exchanges, now may be the ideal time to launch a cryptocurrency exchange and capitalize on a burgeoning multibillion-dollar industry. If you also have the desire of creating a cryptocurrency exchange for the growth of your business, it will be best to hire a trustworthy crypto wallet development company .
According to a recent article on the world's wealthiest billionaires, there are now 12 billionaires directly involved in the cryptocurrency industry, a 200 percent increase from the previous year.
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Forbes reports that Sam Bankman-Fried, CEO of FTX Exchange, is the richest crypto billionaire with an estimated $8.7 billion. Brian Armstrong, CEO of Coinbase, ranks second on the list with a net worth of $6.5 billion. The Winklevoss twins, founders of the Gemini Exchange, are approximately $6 billion. Changpeng Zhao, the founder of Binance, has at least $1.9 billion in assets.
There is a significant business opportunity created by the massive influx of funds from retail traders and financial institutions, even though there is yet to be an assurance of success in launching a cryptocurrency platform. Similarly, ardent proponents of blockchain technology can construct a cryptocurrency exchange to promote the global adoption of Bitcoin and other cryptocurrencies.
What Are The Different Types Of Exchanges?
There are three distinct kinds of platforms. The best way to categorize them is as centralized exchanges (CEX), decentralized exchanges (DEX), and peer-to-peer exchanges, each of which has advantages and disadvantages.
1. Centralized Exchanges
Centralized exchanges are the predominant type of cryptocurrency exchange. Using their infrastructure to serve as an intermediary between buyers and sellers, these platforms act as custodians for the digital assets of their users (similar to a traditional bank). The cryptocurrency exchange or broker will charge a trading fee ranging from 0.1% to 3.99% to cover the cost of providing a secure environment.
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2. Decentralized Exchanges
Decentralized exchanges, or DEX, are non-custodial compared to centralized exchanges. Therefore, the business does not store the digital assets of its customers. The company's underlying infrastructure is designed to facilitate transactions between buyers and sellers in which funds are sent directly from each wallet onto the blockchain. These exchanges offer the highest level of security, but their features are limited to maximize revenue, and they have low trading volumes and liquidity. But, if you are curious to raise the level of your business’s income, liquidity, and more, you can get the advantage of the services of a blockchain app development company.
3. Peer-To-Peer Exchanges
A Peer-to-Peer (P2P) exchange is similar to a decentralized exchange in that the platform provides the underlying infrastructure and hardware to facilitate direct transactions between two parties. Rather than connecting two wallets, a peer-to-peer cryptocurrency exchange connects buyers and sellers via an escrow service to ensure a successful transaction at the agreed-upon price and payment method.
Cryptocurrency trading volumes are relatively low in the United States, Canada, and the United Kingdom. The popularity of these platforms has skyrocketed in Africa and countries where Bitcoin exchanges are prohibited. LocalBitcoins and Paxful are some of the best P2P crypto exchanges.
What Is A White Label Crypto Exchange?
A white-label cryptocurrency exchange is a pre-built software development kit that integrates with the blockchain ecosystem to provide a fully customizable trading platform bearing your brand. Off-the-shelf products can be customized to include particular features, trading pairs, VIP levels, and tiered trading fees.
HollaEX, Skalex, AlphaPoint, and EsPay are among the companies that offer white-label exchanges. Each solution's features differ but aim to provide individuals with a low-cost, risk-free cryptocurrency trading environment.
Starting A New Crypto Trading Exchange
A high level of technical expertise, knowledge, resources, and time is required to transform an initial business concept into a cryptocurrency exchange. Depending on your background, you may need to collaborate with individuals who share a similar interest and can fill in any knowledge gaps. Based on feedback from multiple exchanges, here are a few suggestions and guidelines for launching a Bitcoin trading platform.
1. Conduct Thorough Market Research
With any new business endeavor, it is essential to conduct due diligence and market research. For locating cryptocurrency-related interest groups, forums, and social media are good starting points. Determine if there is a demand for a specific type of exchange (e.g., centralized or decentralized), a feature that is not available locally (e.g., a Bitcoin savings account that pays interest), traders' preference for a crypto product (e.g., leverage trading or CFDs), or an exotic altcoin that is not listed on any other exchange.
Understanding your potential customers is a crucial, time-consuming process. Specific features and products will aid in the development of a custom marketing campaign before deciding on the exchange model.
2. Choose Which Countries To Support
The best place to start a new cryptocurrency exchange is in your own country, where you are familiar with the governing policies about cryptocurrency exchanges. Compliance with financial licensing requirements and regulations within each jurisdiction can be one of the risks associated with expanding the business globally, despite the benefits of attracting more users. In addition, the exchange must support multiple fiat currencies and implement a payment processor to accept crypto payments such as credit and debit card transactions.
Initiating a crypto-to-crypto open-source platform without a fiat currency onramp will result in less regulatory compliance. As a result, the exchange can be launched without delay due to traditional financial regulations.
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3. Keep Up With Legal Requirements
Governments in different nations have different regulations and legal requirements for crypto investment and trading. You must thoroughly understand the laws for launching your cryptocurrency brokerage. Violating rules such as Know Your Customer (KYC) may result in civil and criminal charges.
BitMEX is a well-known example of a cryptocurrency margin trading exchange that failed to comply with local authorities. The business was accused of operating an unregistered cryptocurrency platform in the United States and violating KYC/AML regulations. As a result of the fees, the exchange has lost its position as the leading exchange for trading derivatives.
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Obtaining a financial trading license or regulatory approval can be time-consuming and must be factored into the overall development process. If legal compliance is not your forte, retaining legal counsel or a third-party legal team would be prudent.
4. Partner With Experienced Developers
If you are not a skilled developer, you must hire a team or outsource the exchange's development to a third party. Different companies will charge varying prices, so you must research. The cheapest solution only sometimes pays off in the long run, so do your research to find a reputable, experienced company. There is also the option of utilizing battle-tested software and proven solutions, such as open-source white-label exchanges.
5. Decide If You Want To Accept Fiat Currency
It is becoming more common for exchanges only to accept deposits in USDC or USDT, eliminating the need for a third-party payment processor or bank. If you wish to receive fiat currency deposits in a local currency, you will need to engage a payment processor or bank and integrate the exchange.
It is essential to ensure that the bank is crypto-friendly or to utilize reputable third-party providers like Banxa and Simplex. These fiat-to-cryptocurrency integrators accept various payment methods for purchasing cryptocurrencies, including credit cards, Apple Pay, SWIFT, SEPA, and more. KuCoin, Binance, Changelly, and Poloniex are examples of cryptocurrency exchanges employing Simplex as payment processors.
6. Ensure a high High-Level Of Security
The only reason individuals do not invest is the fear of losing money. For this reason, they always seek out exchanges with top-tier security for all transactions. In a world with so many hacking incidents involving cryptocurrency exchanges, it is understandable that customers may be wary of investing. And what could be more popular among cybercriminals than a digital currency? The security of the business should therefore be your top priority.
7. Focus On Your Target Audience
Any business launch requires an effective marketing campaign and strategy. People will only be aware of your business once you find a way to ensure they do. You must have a marketing team that consistently devises effective strategies for advertising your exchange.
A common method to attract new traders from other exchanges is to offer a native exchange token. Similar to platforms like Binance (BNB), Crypto.com (CRO), KuCoin (KCS), and FTX (FTT), customers who purchase and hold the token may be eligible for reduced trading fees, loyalty discounts or crypto cashback rewards.
If you have an established business, a user base, or even social media followers, you are in an ideal position to operate a cryptocurrency business. As crypto becomes integrated into payments, stocks, and even art and gaming with NFTs, it is a viable business model to offer crypto services as a value-added service through an exchange. This could be a simple cryptocurrency wallet for storage, similar to a traditional bank, and not a full-fledged cryptocurrency exchange.
8. Offer the Best Customer Support
To ensure the success of a cryptocurrency exchange, the team must prioritize the customer. Comprehensive how-to guides, a frequently asked questions section, a live chat box with a real person, a ticketing system, or even a phone number/email address can be components of high-quality customer service. Intercom's live chat software is an example of a live chatbot.
Customers who invest through your exchange will expect nothing less than exceptional customer service; if they do not receive it, they always have the option to invest elsewhere. As the market never sleeps, your exchange support team should be available 24 hours a day, seven days a week. Providing personalized support will ensure that you encourage them to remain loyal to your company.
Why Launch A Crypto Exchange Business?
There are numerous advantages to launching a cryptocurrency exchange. Launching a Bitcoin exchange can be a very lucrative business venture as the number of crypto exchange billionaires rises. Coinbase, one of the leading cryptocurrency exchanges founded in 2012, is a good example.
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The company launched its Initial Public Offering (IPO) with a valuation of $66 billion and a reference price of $250 per share unit in a relatively short period. This valuation exceeds that of some of the world's largest banks, such as JPMorgan, currently valued at $25 billion. In addition to the financial benefits, additional reasons exist to create your cryptocurrency exchange, as described below.
Increasing Demand For Crypto Trading
The trading of cryptocurrencies has increased in recent years, and this trend will continue. If you can establish yourself as a well-known business now, you will be well-positioned for success before the market becomes saturated. To attract a specific type of investor or trader, choosing the country to operate and the cryptocurrencies to list is crucial.
Can Set Up An Exchange In Minutes
White-label cryptocurrency exchange products enable serial entrepreneurs and cryptocurrency enthusiasts to establish exchanges. Skalex and HollaEX are examples of cost-effective, open-source solutions with an integrated liquidity provider. This allows a new business to be launched rapidly with minimal risk and efficient use of financial resources to concentrate on branding and marketing.
Straightforward Business Model
Many people initially need help comprehending how to launch a blockchain technology-based business. However, with the right team and knowledge, operating a cryptocurrency exchange is a relatively simple business model. The primary objective is to entice customers to create accounts, deposit funds, and digital trade assets. A small commission is paid for each successfully executed trade in exchange for supplying the user interface, storage infrastructure, and security. Providing excellent customer service is crucial for retaining users on the sale.
Run A Crypto Business From Anywhere
The best aspect of a cryptocurrency business or any other online business is that it can be remotely managed, operated, and supported from any location with internet access. The team of developers, software engineers, customer support representatives, and security architects can work remotely or from different countries. As the exchange is open 24 hours a day, seven days a week, having employees in different time zones can be advantageous to ensure continuous customer service.
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In recent years, cryptocurrency trading platforms have gained immense popularity. There are approximately 504 exchanges, so establishing yourself can take time. If you create a crypto business and launch a Bitcoin exchange, you must research your competitors and select a trustworthy brand.