If you want to start your cryptocurrency exchange business, you have taken the right decision at the right time. The cryptocurrency business is prospective and if you have a good idea and are ready to invest your time and intellect, it will give you high profits.
Though it is without saying, you need to follow certain steps systematically to succeed in this business.
12 Steps to Start Cryptocurrency Exchange Business
1. Choosing the Location for Starting a Crypto Company
First of all, you have to choose the country where you want to start the cryptocurrency exchange business. Many countries are skeptical about this new trend in financial business. While in countries like the USA it is much more convenient to start a cryptocurrency. Choose a country where it will be easier for you to run your business.
2. License and Permits
After choosing the country, you have to complete the legal formalities for starting your business. Firstly, register your cryptocurrency-related business. If you are from the United States, it is advised to form an LLC as it will help in protecting personal assets if sued for financial reasons.
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Obtain the necessary license and permits from the authorities to run your business free of hassles. In the US, you must be a licensed Money Transmitter and you are required to follow SEC and CFTC rules and regulations. You will also have to follow the KYC details for a proper legal business. Take advice from a skilled and trusted attorney regarding these matters.
3. Naming the Exchange
Find a suitable name for your cryptocurrency exchange business. The name should be meaningful and relevant. Don’t go for any poetic or symbolic name. Rather, serious and communicative names are the best.
Also, don’t forget to check domain availability similar to your business name. This is because it will be difficult for you to create a crypto-related website in the future if the desired domain is already registered.
4. Authentic Software Provider
The development of the cryptocurrency exchange platform is a highly specialized technical job that needs the expertise of efficient programmers. If you know the technology, you can do it yourself. However, it is better to hire an authentic software provider in setting up your exchange. It is not just setting up; the exchange needs to be updated regularly.
The authenticity of the software used is a cardinal point in establishing your business. Research the available software providers, check their market record and success rate, and then decide. Some companies provide turn-key solutions. Customized solutions are also available.
White label software is tested software that runs successfully. You can also opt for that.
5. Establishing Liquidity
In the next step, you have to establish the liquidity of your cryptocurrency exchange business. Without that, your customers won’t feel confident to invest funds or do trading in your exchange. There are different ways of establishing the liquidity of your exchange.
Firstly, you can do transactions in your exchange within some accounts created by you. The records of transactions will generate confidence among your prospective clients.
Secondly, you can use Application Programming Interfaces (API) in your exchange to connect your exchange with other exchanges. This will enable you to accomplish trade and get the data from the established exchanges.
Thirdly, you can get connected to a network of cryptocurrency exchanges that tie up the liquidity of all the exchanges within the network. This will make your operations bigger and wider.
6. Choosing a Bank or Payment Processor
You have to partner with a bank or payment processor for processing the payments made. Different institutions have different formalities. Go through the regulations of each processor and find out whether there are any hidden fees incorporated there. Also, check the authentication of these institutions in payment processing. Legal compliance in processing is very important. Otherwise, you may face problems with cybersecurity.
7. Maintaining Safety Measures
Security measures are of top priority in your cryptocurrency exchange business. Since your exchange will have the KYC details of your clients along with their bank account details, maintaining top-grade cybersecurity measures is of prime importance. Regular updating and security checking by expert IT service providers are a must for your business. You have to take all possible measures to check the possibilities of hacking and data theft.
8. Launching the Website
After completing the legal and financial formalities, it is time to launch your cryptocurrency exchange website. Make sure that your website goes through beta testing before it goes live. Beta testing must be done to ensure that your users are satisfied with the website before you make it live.
9. Campaigning for the Exchange
The success of your cryptocurrency exchange business largely depends on marketing and campaign strategies. Formulate a well-researched and well-thought marketing plan for your exchange. Take the help of experts in this regard. Also, follow the strategies adopted by established crypto exchanges.
The social media campaign is very effective in this regard. Create pages in the social media handles in the name of your exchange and update the pages regularly. Highlight the facilities offered by your exchange and narrate success stories.
Word of the mouth publicity also plays a very important role in the publicity and growth of your exchange.
10. Providing Customer Support
Prompt and efficient customer support is the keyword for the success of any business. Your cryptocurrency exchange business is no exception. Build up an efficient network of customer support systems. Make sure that all the queries of the customers are answered promptly and meaningfully.
You can also take the help of chatbots for answering the queries and questions of your customers round the clock.
You can also provide asset management service to your customers as a part of customer service.
11. Recruiting Able Professionals
Your cryptocurrency exchange business will need skilled manpower in different fields like operations, technical support, marketing, promotion, etc. Hire competent people for each position. Make sure that they have a basic idea of cryptocurrency. You can also hire experienced people. A good and encouraging orientation of the workers will generate much better results.
Keep one thing in mind in this regard. Do not share sensitive information with any of your workers. That may affect the security of your business.
12. Hire a Skilled Legal Team
Your cryptocurrency exchange business is not restricted to the country where you have started the business. Rather, this business is spread over customers and traders of different countries around the globe. Each country has its own rules and regulations and you have to follow them. Therefore it is always advisable to have a skilled legal team on your payroll to avoid any legal problems.
The cryptocurrency exchange business is very promising showing signs of a bright and profitable future. Cryptocurrency trading has increased to a great extent in the last few years.
Frequently Asked Questions on Cryptocurrency Business
What is Cryptocurrency Exchange?
Actually, the cryptocurrency exchange is a digital platform wherein traders buy and sell cryptocurrencies. The payment can be made by cryptocurrencies, or by fiat money.
As the owner of a cryptocurrency exchange, you will charge a commission from the traders for each transaction made. The charge may vary between 0.1% and 3.99%.
Types of Cryptocurrency Exchanges
There are three types of cryptocurrency exchanges:
- Centralized Exchange or CEX where the traders’ digital assets are stored.
- Decentralized Exchange or DEX where the digital assets are not stored.
- Peer to Peer Exchange or P2P where a direct transaction between two traders takes place.
Furthermore, as per the rate of profit is concerned, CEX will be your best choice for starting the cryptocurrency exchange business.
Best Cryptocurrency Exchanges
Let us know the names of some of the best cryptocurrency exchanges in the world both in terms of business volume as well as operations:
- Binance US
- FTX US
How to Mine Cryptocurrency?
You must have heard the term cryptocurrency mining. It is not the mining we know commonly. Mining in cryptocurrency means introducing new cryptocurrencies that enter into cryptocurrency circulation and are added to the Blockchain record. Cryptocurrency mining is done with very high-end computers with high speed along with special software.
Suggested Read: Best Types of Cryptocurrency to Invest
The computers must have GPU (graphics processing unit) or an application-specific integrated circuit (ASIC). This tool is used to solve complicated mathematical problems that are necessary to mine cryptocurrency.
The cryptocurrency miners are rewarded after their new crypto completes a successful transaction. According to Statista, 2021 can be marked as a revolutionary year for the growth of cryptocurrencies.
Hence, the convenient and lucrative business model of cryptocurrency exchange is going to be a very successful venture for you.
About the Author: 99businessideas.com led by Rupak Chakrabarty is committed to helping beginners, entrepreneurs, and small business owners in starting, managing, and growing their business. Our aim is to educate the entrepreneur on the various stages of entrepreneurship.