How to start a crypto exchange | What you NEED to know

How to start a crypto exchange | What you NEED to know

Robert McDougall 

October 11, 2022

Cryptocurrency

The crypto industry has grown remarkably fast over the past decade, with the number of cryptocurrency users growing every day. It is one of the fastest growing industries in 2022, with an estimated total worth of over US$1 trillion. Not every crypto exchange on the internet is successful, but those with the right approach definitely are!

If you are also planning on starting your own crypto exchange, you have to keep several crucial things in mind and evaluate what traders and investors need and want. Read on to find out how to start a crypto exchange and how you can make your launch successful.

   Key Takeaways

  • Adhere to relevant regulations, and acquire appropriate licenses and registration
  • Know your target market and understand what they want in an exchange
  • Offer a range of services so your users don't need to switch to another exchange
  • Support a wide collection of cryptocurrencies
  • Minimize fees to attract new users and remain competitive
  • Ensure your security protocols are top-notch so users can trust your exchange

Legal licenses, registration, and agreements

Everyone wants some assurance that they are making the right choice with a trusted and reputable cryptocurrency exchange. This is where legal licenses come in, enabling the involvement of government agencies that undertake checks and balances. 

You also have to be mindful of regulatory demands and agreements when starting your own cryptocurrency exchange. In some countries, governments require crypto exchanges to adhere to the KYC requirements and verify users through this process. Lastly, whichever jurisdiction you are planning to offer your crypto services in, make sure to check its regulatory and legal demands and see if you can proceed.

Accessibility and global support

Knowing your target market is unquestionably one of the most important things to consider when building your own crypto exchange. There are cryptocurrency exchanges for US or European users. Depending on how easily you can scale your crypto exchange and how big you are planning to invest, you can target different regions and start offering your services.

If you are looking to put up a regional crypto exchange targeted to a single or a few jurisdictions only, it will be easier to manage. You will face less challenges in getting regulatory licenses, and you would also not need tons of resources. But if you are going for global crypto exchange, be ready to invest a substantial amount of your time, money, and skills.

Variety of services

No one really wants to jump from one cryptocurrency exchange to another just to use a specific crypto service; pretty much everyone prefers to get everything in a single place. But again, what you are going to offer and how you will do it depend on your aim, goal, and skill set.

For a trading-specific cryptocurrency exchange, you have to add the tools that would fulfill the demands of the current industry. You can also go with a solo investment-based crypto exchange or an exchange that only allows direct sales and purchases. But a cryptocurrency exchange with all-in-one services would always be preferred by most users as it provides ease and peace of mind. That is why it is better to take your time and add as many features as you can, no matter how many collaborations you would have to enter into.

Number of cryptocurrencies

The average trading community is interested only in assets like BTC, ETH, or Doge that are popular on social media. But social media is also bringing attention to a lot of other coins, and encouraging people to invest in them and hold them on the exchanges or in their own wallets. 

In other words, it is important to create diversity and let investors invest their money in different assets. It also becomes easier for traders to explore different markets and divide their funds to reduce risk. So yes, most traders would also prefer to go with a crypto exchange with greater diversity than the one with few available assets.

Liquidity

Liquidity is a basic pillar for any cryptocurrency exchange; without it, an exchange can fail in no time. Higher liquidity simply indicates a better trading system, faster-executed trades, better prices, and a seamless experience. You have to provide traders and investors with high liquidity so that they can trade without paying a higher fee or an unjustified value of an asset. If your exchange has low liquidity, many traders would migrate to other exchanges, ruining the whole ecosystem you built.

One thing you can do is connect with other exchanges and merge liquidity to serve your users without any issues. The bigger the network, the more liquidity you will get, and the better the experience will be for your traders and investors.

Trading, deposit, and withdrawal fees

Considering the number of cryptocurrency exchanges available on the internet, you will have to set suitable trading, deposit, and withdrawal fees to attract more users. This is why it is important to keep all types of fees and commissions minimal, at least at the start. Once you have built your network over the internet and have users who have started to trust your services, you can make your fee competitive according to current industry rates.

User interface and registration process

Complexities and over-complication confuse most people trying to enter the crypto industry, and they eventually quit trying due to these problems. So, if you want your users to have a good experience, make sure to keep your crypto exchange interface as simple as possible and separate the features to avoid confusion.

Never burden users with countless questions during the registration process—keep it short and simple. Ask for verification after the registration process, and let users complete the verification process just as they want.

Security and insurance

Opt for cold storage systems that securely store the funds of your users, making it impossible for outsiders to access them. Integrate other best security practices as well. Two-factor authorization, email verification, and SMS verification are some of the security features that you should keep in mind when creating your own crypto exchange. You can also have third-party insurance when the situation is out of your control. It might seem like a hassle, but it can be worth it if you are scaling your exchange in a major way.

Customer and legal support

Show your users that you value them by forming a dedicated customer support team. Keep track of all the legalities as the rules and regulations are progressively becoming stricter in every jurisdiction.

Advertise and develop a brand

The only way you can compete with the rest of the cryptocurrency exchanges on the internet is through advertisement. If you cannot advertise, your exchange will not be discovered by users— no reach, no traffic, no revenue, no profit. Use social media or other means, advertise properly and target the right audience. Create a brand to represent your crypto exchange just the way you want.

Centralized vs. Decentralized Exchange - How do they work?

Take a look below to find out the different types of cryptocurrency exchanges.

Centralized crypto exchanges

Centralized crypto exchanges are the most popular among users looking forward to a simplified trading and investing experience. These work as an intermediary that manages all the transactions, funds, and services on the internet. In other words, there is a formed party that is in control of what is happening on the exchange and how it would work. Centralized crypto exchanges work as brokers for any deals and have full control over the funds of their users.

Decentralized crypto exchanges

In decentralized crypto exchanges, there is no third party involved and no one has control over your funds. All the processes, transactions, and activities are automatic, based on smart contracts and other efficient technologies. Decentralized exchanges usually come with a voting system where users can vote on different things regarding the platform and make changes, in case everyone approves. This way, the exchange keeps growing with satisfied users who can trade, buy, and sell with more security, safety, and anonymity.

Conclusion

You can be successful in creating your own cryptocurrency exchange if you keep all the points mentioned above in mind. Surely, there will be some hassles and problems that you will have to go through, but the hard work can be rewarding. Hire developers, marketers, and managers who have hands-on experience in the crypto industry. Do your own research, analyze the competition, check.

Marketplacefairness.org provides all its content for informational purposes only, and this should not be taken as financial advice to buy, trade or sell cryptocurrency or use any specific exchange. Please do not use this website as investment advice, financial advice or legal advice, and each individual's needs may vary from that of the author. This post includes affiliate links with our partners who may compensate us. 

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