Now that you are aware of the procedures required to launch your own cryptocurrency exchange, let’s look at them in more detail.
1. Consult a lawyer to ensure that all licensing requirements have been met.
It’s crucial to acquire legal advice before putting your strategy into action so you can comprehend the regulatory requirements of your new business. In each country where the business intends to conduct business, the appropriate licensing must be secured. As governments and regulations have not yet kept up with technology, exchanges operate with little to no oversight in many locations. In contrast, in other locations, such as the US, Bitcoin operators are required to have a license as Money Transmitter Businesses and to abide by SEC and CFTC rules and regulations, among others.
A good lawyer is a need. Exchanges typically must go by Know Your Customer (KYC) rules because they fall under the category of currency exchanges, and these rules are becoming more and more common to fight money laundering. These regulations, for instance, have been in effect in the United States since 2002 as a result of the Patriot Act. The laws differ between jurisdictions, so make sure to speak with a lawyer experienced in the field.
2. Obtain venture funding.
You should be aware of the anticipated expenditures before beginning your job. A minimum of $135,000 is required to establish and launch a bitcoin exchange. The price of technology, hosting, some initial legal counsel, government registration, and first advertising are all included in this.
Even if not all finances must be provided up front, it’s crucial to make sure the enterprise has availability to enough money to provide it a decent runway. Startups sometimes make the error of failing to prepare for the future, resulting in modest first raises that may cover development costs but deprive the business of the vital operating capital required until it achieves profitability. Startups frequently commit the error of obtaining licenses from dishonest cryptocurrency exchange providers, who collect recurring fees without disclosing the costs and legal duties associated with establishing and operating an exchange.
3. Locate a supplier of technology solutions.
The turnkey custom cryptocurrency exchanges offered by Modulus are provided for a one-time license cost without any additional royalties or commissions. Clients can maintain the exchange themselves, there are no recurring fees, and they receive entire source code, which is crucial for auditing because some authorities ask to see the source code. Modulus has more than 20 years of experience creating stock exchanges, including the back end technology used by some of the biggest stock exchanges in the world. Modulus has always aimed to offer clients significant value.
Why white label software with sources? White label exchange software that includes the complete source code enables complete customizability similar to a custom-built exchange while dramatically reducing time to market and total cost.
4. Connect other exchanges to yours to increase liquidity.
Liquidity is the basis of any successful exchange. Prospective clients will view your new enterprise with mistrust if it lacks an order book and trading activity. We can integrate your exchange with a network of active exchanges, improving its liquidity, to get around these problems without having to fake activity using dummy accounts within the new exchange. Keep in mind that your new exchange will have less trouble with liquidity the more exchanges there are in the network.
5. Collaborate with a credit card processor.
All payment processors are not created equal. Among other things, fee structures will differ greatly amongst businesses. To compete with other exchanges, you must have the lowest transaction rate. Additionally, you should make sure you read the deal you’re signing because some processors include hidden costs in their agreements. Settlement time and adherence to PCI DSS, a set of best practices to protect cyber security, are two more distinctions amongst processors. Be aware that while many state laws in the US do compel compliance, federal law does not.
To protect your new business from online risks, make sure your payment processor is PCI-compliant. Another illustration of how critical it is to comprehend the nuances of industry regulation is provided here.
6. Put optimum security practices into action.
With offline cold storage wallets, two factor authentication, and encrypted databases, exchanges built with Modulus technology are among the most secure in the world. Additionally, Modulus technology doesn’t keep passwords (only hashes). We’ve written a lot about the data breaches that have made headlines in the sector, such Mt. Gox and Bithumb. The final word? Since cryptocurrencies are now a prime target for hacking and fraud, exchanges are scrambling to set themselves apart on the basis of security.
7. Launch after beta testing.
Your exchange has been created. You have a contract in place with a company that handles payments. Additionally, you have gone to great lengths to guarantee that your exchange complies with all laws and norms. You have taken steps to protect your business against cybercrime. It’s now time to begin your exchange and run a beta test of all of its features.
8. Launch a publicity and marketing effort.
Interact with crypto news outlets like Coindesk once your exchange is launched, for example. To avoid having to scramble to find more funds after your initial raise, it’s crucial to start planning your marketing activities and their expenditures. Until a critical mass of traders is established, exchanges frequently do not have a marketing budget and instead focus on free social media promotion.
9. Exercise caution when offering client support.
Although providing excellent customer service is the final step in creating a successful cryptocurrency exchange, how well you perform in this area will define your success over the long run. Consumer-facing personnel must pay close attention and satisfactorily address customer grievances and technical concerns. Since cryptocurrencies never stop trading, you should establish a ticketing system like ZenDesk and staff it with trained and friendly people who are ready 24/7 to answer to customers.
10. Keep a legal team on staff to ensure continuous compliance.
We cannot emphasize enough how crucial it is to uphold legal compliance and adhere to all existing and prospective laws and regulations, not only in the country where your exchange is based but also in any other countries where your exchange’s members or traders will live or conduct business. In order to maintain your exchange legal in all of the countries where you will do business, it is crucial to either engage a full-time in-house legal compliance team or outsource to renowned law firms. This is because cryptocurrency rules are fast shifting globally.
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