Cryptocurrencies are everywhere at the moment, particularly as many of the earliest investors in currencies like Bitcoin are now reaping the rewards in a very big way. The way we trade is changing all over the world and there are lots of opportunities for savvy business people to get ahead of the game and create their own cryptocurrency business. That is, of course, if you understand the concept and are ready with a detailed business plan. If you are interested in profiting from the trend, this step-by-step guide outlines the key steps involved in starting your own cryptocurrency exchange business to help you kickstart your venture.
Get legal advice and insurance
Legal advice is essential when starting your cryptocurrency exchange as you will need to ensure you have the proper licensing to operate in your state. It’s also important to take out professional indemnity insurance to protect your business financially should you be subject to a lawsuit with an insurance company such as Hiscox.
Source funding for your start-up
The business will require some start-up capital to cover the costs involved in starting a cryptocurrency exchange. Developing and launching an exchange can cost over $140,000 at least for technology, hosting, legal compliance, business registration, insurance, and marketing. These funds may not be required upfront but you need to have a clear plan as to how you will be sourcing the money in the future.
Choose a technology provider
You will need to choose a technology provider that is high quality and open in its fee structure. A one-off license fee without a commission scheme or royalties is ideal as you won’t face ongoing fees. Many people prefer to host the exchange themselves for auditing purposes.
Build a network with other exchangers
Liquidity is a very important concept in cryptocurrency exchanges and early potential customers may not trust you if you are not already trading in some way. To show customers that you are in operation, consider connecting with a network of other exchanges which will enhance your liquidity.
Find a payment processing service
Your payment processing service needs to be as competitive as possible so that can compete with other exchanges. Make sure you are aware of all the fees before you sign any contract as well as key details like the time it will take to process payments and whether the system is PCI DSS compliant to protect against cyber threats.
Protect your business from cybercrime
Cybercrime is a huge risk to all businesses today, but cryptocurrency exchanges are regularly targeted by hackers, so it’s essential that you invest in the very best security. This could include encrypted databases, multi-factor authentication, and offline cold storage wallets.
Deploy beta testing
When you have built the exchange, you have your payment processing service in place, introduced all the necessary protection from cybercrime and are sure you have followed all the legal regulations; it’s time to test launch and test the system in beta.
Market your business
As soon as your exchange is up and running you should start telling the world by sending out press releases to crypto news platforms. Use social media and other marketing activities to increase the exposure of the business. It’s best to keep marketing costs as low as possible to ensure you don’t blow your budget in the first few weeks of operation.