How to start a Cryptocurrency Exchange?

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    Are you thinking of starting a Cryptocurrency Exchange?

    Cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Stellar or Dogecoin and hundreds of others have become an established part of current finance. There are three main ways to become involved, either as a miner, direct investor, or provider of services to the millions of people or companies that want to buy, sell, or swap cryptocurrencies. This article will show how the third option can be one of the most rewarding ways to become engaged in this booming sector.

    Some of the steps we recommend would apply to any entrepreneur setting up a new online business. Others are relevant to the dependence of the business’s success on good marketing and proper management. A simple good business practice that is not directly connected to cryptocurrency exchange is essential in both of these aspects. Finally, we will outline the specific elements that are derived from the nature of digital currency trading. In general, we will spend a bit more time on this.

    Phase 1 – Common steps to create a new cryptocurrency startup business

    All cryptocurrency startups should begin by taking these fundamental steps.

    1. Research the services you will offer to have a complete understanding of what the market expects. Learn all there is to know about the existing competition. By providing services on the open internet, you can’t expect to gain any geographic advantage, so knowledge of the state of your opposition is vital.
    2. Try to estimate based not only on best-case projections. Prepare complete plans for how you will be operating, including expense budgets and sales forecasts. Prepare cash-flow estimates for the initial period from your plans and if you are financing the operation yourself, check that your available resources can safely cover the projected costs. If you rely on external finance, get this committed based on the projected forecasts and cash flow estimates.
    3. Setup your website on a secure server, with suitable marketing analytics tools

     

    Phase 2 – Establish the cryptocurrency exchange

    The basic requirements necessary to run a cryptocurrency exchange generally cover these steps:

    1. Select the jurisdiction of your operations
    2. Set up a corporation within the jurisdiction
    3. License your exchange
    4. Select the software package to run the exchange
    5. Select a payment processing provider
    6. Secure the site

    Since these are steps that are specific to establishing your cryptocurrency exchange, we will expand in greater detail here on what should be involved in each of them.

    Selecting a jurisdiction for your cryptocurrency exchange

    Individual countries and jurisdictions have their own laws dealing with cryptocurrencies in general and also in the establishment of exchanges. Some countries ban all dealing in cryptocurrencies. Some tolerate ownership and trading but do not permit the establishment of an exchange. More advanced countries have legislation in place that allows the establishment of exchanges and set out the laws and practices under which they must operate

    One of the aspects to consider is to match the scope of your exchange’s activities to those permitted in the jurisdiction. Usually, you will be choosing between establishing a classical cryptocurrency exchange, which allows customers only to buy, sell and swap cryptocurrencies exclusively, or a fiat exchange, which enables them to exchange cryptocurrencies into traditional (fiat) currencies and vice versa.

    It is vital to have chosen the jurisdiction from which you will operate before any other steps are taken. You should engage the services of a legal advisor with experience in this field to ensure that your operation is permitted and advise on the licensing requirements.

    Establish a corporation inside the jurisdiction

    Although it may not be a legal requirement in some jurisdictions for the cryptocurrency exchange to be owned by a company, it is highly advisable in order to provide limited liability protection in the event of failure. In the case of an exchange being set up inside the European Union, the process is quite simple and relatively inexpensive. You can

    cryptocurrency Licensing

    Depending on the jurisdiction in which you are seeking the license, there may be some variations, but the following are typical requirements:

    • Nominate a locally-resident director with a good reputation and experience
    • Agree to the strict Anti-money Laundering (AML) and Know Your Customer (KYC) rules that apply in the jurisdiction
    • Provide proof of a bank account within the jurisdiction, usually with a minimum balance (in the EU, this account can be in any member state)

    To obtain a crypto license, certified copies of corporate documents are required, such as:

    • Articles of association
    • Business plan
    • Website privacy policy terms and conditions
    • Identification of the ultimate ownership of the company, with a confirmation of the origin of the funding
    • Proof of Identity (Passports, IDs etc.) of all shareholders, directors and senior executives
    • Addresses of the wallets

    Selecting cryptocurrency exchange software

    The first choice to be made is whether you will build your own software solution either with private resources or as a turnkey project provided by a vendor. In general, this option can get you some unique advantages over the rest of the market, but it is more expensive, with longer lead-in times. Alternatively, you can choose from the many “white label” solutions. There are hundreds of software services and packages specifically designed for cryptocurrency exchange operations. These can be leased or rented without substantial upfront expense.

    The process of selection involves evaluation of many features of the offering, such as:

    • the range of functions provided, including
      • a good user interface.
      • the range of digital assets it supports (currencies, NFTs etc).
      • ability to leverage rates
      • allow peer to peer trading.
    • the reputation of the vendor
    • post-sales support services offered
    • the cost of purchase, development or rental

    Select a payment processing service provider

    All business conducted through the internet requires a channel for the movement of funds between the customer, the merchant and the financial institutions involved. This is provided by a payment processing (or payment gateway) service, which acts as the mediator facilitating the transfer between your customer’s wallets, your exchange and your bank.

    The main features that will be important when choosing between the cryptocurrency gateways available in the market are the range of fiat and cryptocurrencies that it can accept, which must match your own services offered to customers. As well, the ability of the processor to interface with your selected merchant bank directly, without passing through external interfaces is vital, since this will speed up the movement of funds and minimize per-transaction costs.

    You will also to open a crypto business bank account to your startup

    Secure the site

    Privacy, security and safety are essential components of all internet business. The waves of account raids, major hacks, DDoS attacks, and other security compromises have made customers fully aware of the risks of trading on unsecured websites. Remember, one of the main attractions of cryptocurrencies is the anonymity it offers. For these reasons, you should invest substantially in the necessary steps to protect your data fully, provide guaranteed uptime, and be able to prove to your potential customers that you are protecting yourself and them from malware, phishing, attacks or cookie thefts.

     

    Phase 3 – Promotion, marketing and advertising

    1. The success of any internet business depends on its ability to generate traffic to the website so that potential customers can find services that match their specific requirements.

    Your cryptocurrency exchange needs tools that generate leads by driving traffic to the site through online marketing by using digital channels to distribute your promotional messages.

    In general, these tools are common to all internet marketing campaigns, having the same applicability in digital currency exchanges as they do in other online businesses. However, you should at first be concentrating on existing media that are already based on cryptocurrency trading, such as:

    • 99 Bitcoins
    • Bitcoin Magazine
    • Coinspace
    • CoinDesk
    • CoinTelegraph
    • Сryptonewmedia

    The most common components of internet marketing and promotion campaigns are:

    • Email lists
    • Banner ads
    • Pay per click (PPC),
    • Social media marketing
    • Targeted marketing
    • Blog posts and articles
    • Help services
    • Podcasts

    If you don’t already have the experience and expertise in marketing and promotion of online services, hundreds of consultancies offer their services to boost your online presence. As well, many educational institutions provide training in this.

    Get in touch with a GBO professional today.

    Contact a GBO professional to begin your cryptocurrency business today

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