Starting any kind of business can be daunting as well as an exciting venture, and the cryptocurrency exchange business is not any different.
You’ll have to do some groundwork and research on the crypto market, create a business plan, search for important information like how and where to register your brokerage business, and also the kind of software and trading instruments you’ll need.
But it doesn’t have to be difficult after doing some research here and there and applying it to your business.
Also, it’ll interest you to know that:
- There are over 300 million crypto users in the world and over 18,000 businesses use cryptocurrency for their transactions.
- By 2023, the global Blockchain industry will increase to $23.3 billion.
- The market size for cryptocurrency will go up to $1087.7 million by 2026.
You can see that whatever sacrifices you’re about to make will be well worth it.
In this post, you’ll learn 10 steps that’ll help you kickstart your cryptocurrency exchange business. From what you need to know to how to go about them.
Let’s get started.
1. Develop a business plan/strategy
As a business owner, mapping out a business plan is vitally important. It will save you a lot of unnecessary stress and it’ll give you a framework that’ll guide you as you scale through your business.
Here are a few questions to ask while creating a business plan.
- What will it cost you to set up your business, and if you don’t have the funds how do you intend to get them?
- Who is your target audience? Will they come from all over the world or just from a few selected countries?
- Do you have a business name yet?
- How do you plan to structure your pricing? How will it benefit both you and your audience?
- What are the legal actions you need to take?
- How can you make more profits? What is your scaling plan?
These are a few things to note among others. Knowing the answers to these questions will expose you to new issues around your business that you didn’t know about before.
2. Ensure you have sufficient startup funds
Business needs money to run smoothly, and for your cryptocurrency exchange business to be successful you need money to make up for all your expenses, at least during the first year of your business.
If you don’t have enough capital, you can seek out investors that are willing to support your business.
Just create a clear business plan or a pitch deck that shows how you intend to scale your business. Give them enough reason to trust you.
3. Licensing and compliance requirements
Cryptocurrency businesses must be licensed to avoid court cases and being sued.
There are a lot of things to consider when licensing your cryptocurrency exchange business.
You’ll need to study the jurisdiction around cryptocurrency in your country.
I’m sure you know about KYC( Know your customers). It’s a process that’s compulsory for all currency exchange business owners.
It involves practices that ensure its customers are verified either through government ID cards or passports. The purpose is to avoid money laundering.
To set up your cryptocurrency exchange business you need to incorporate the KYC norm to allow a smooth customer verification process. Do this to avoid the authorities chasing after you.
Also, maintain a legal team for ongoing compliance.
Cryptocurrency has gained global traction and this means that your customers can come from anywhere around the world.
So you’ll want to make sure you know about the regulations in those countries where your customers reside. You will not be able to do it alone therefore you should seek help to ensure your cryptocurrency exchange business is legal across all countries.
You could hire a legal practitioner for the team or you could give the job to trusted law firms.
This is essential because cryptocurrency laws keep changing and you don’t want to be caught unaware and pay for something you didn’t know about.
4. Connect With a Liquidity Provider
Another vital need for your cryptocurrency exchange business is a liquidity provider. It is very essential to the success of your business.
Your clients will need leverage at some point, especially clients who own businesses that accept cryptocurrency.
Customers trust cryptocurrency businesses that offer liquidity, they love to see trading activities before depositing funds or placing orders.
It can be challenging for a new cryptocurrency exchange business to offer liquidity on its own, but it’s not an impossible task.
You can achieve this by simulating trading activities on your platform so that you’ll buy and sell cryptocurrencies within your exchange.
There’s also the option of networking with other cryptocurrency exchange businesses where you’ll find more liquidity. This will allow you to connect your exchange to another exchange using an API interface.
5. Partner with a payment processor
A bank or payment processor is vital for your business to process payments through fiat currency. Choose a bank that’s trusted by the people, and that also has good online facilities.
If you live in a developing or underdeveloped country, choosing a payment processor is not something to be taken lightly.
These banks in developing countries may not have the technology to process instant transactions and may take days before a transaction can be completed.
In choosing a bank to partner with, check to see if the bank has reliable facilities, fast clearance, and transactions that will make it convenient for your customers to do business with you.
Having a payment processor will set you above your competitors because it’ll give your customers different options for deposits and withdrawals on the crypto platforms.
You’ll need to have a payment gateway to make all these processes easier.
7. Setting up your brokerage operations
After researching the vital needs for your cryptocurrency exchange business, you’ll need to host your brokerage business on a responsive front-end website.
Then you’ll factor out the trading platform you want to use and other revenue streams you might want to add.
A physical office is also necessary. You don’t want your business to be a faceless one without an actual location.
You won’t be able to do everything on your own, so you’ll need a staff or team of personnel who are good in IT, finance, sales, and marketing.
It helps to put all these in place to ensure a smooth operation.
7. Pre-Launch and Going Live
After you’ve defined your audience, done all the legal work, developed your website, and set up all that needs to be set up. It’s time to test-run everything before going live.
Trade cryptocurrency on your website. Ask friends and relatives to navigate your website for feedback purposes.
And if there are any hitches ensure to fix them as soon as possible.
Make sure your exchange business and website abide by all rules and regulations that concern the industry. Check your payment processing system, and confirm that it’s secured and safe from attack.
Once you’ve cross-checked and seen that you’re good to go…then your website is ready to be launched.
8. Ensure high-grade security for transactions and customer data
Top-grade security is very vital for any cryptocurrency exchange business. This is for the benefit of both the business owner and her clients.
You need to protect your customer’s data, your funds, and important information like bank details.
Cyber thefts are very common on the internet now, and many top companies have fallen victim to them. And these cyber thieves can be so smart that they can steal from you for a long time before you find out about it.
Therefore, cybersecurity for your website should be taken seriously.
Use technology that has two-factor authentication, an encrypted database, and an offline cold storage wallet.
Invest your time and money in best security practice, no matter how strenuous it might be, because it’ll pay you in the long run.
9. Be open to innovation and adaptation
The cryptocurrency exchange industry is a fast-moving industry and one intrapersonal skill you need is adaptation and being innovative.
The market will always change, and it can happen overnight, that’s how the crypto market works. So you have to be ready at all times to ride with the tide. If you’re not open-minded and you don’t know how to adapt, your competitors will outrun you and you’ll be left behind.
On some days you’ll stay up late tweaking and upgrading the technical aspect of your business to keep up with the changing Industry.
You should be willing to do what your competitors aren’t doing. Try out new sources of income, create offers and products and catchy bonuses, etc. This should keep you going
Develop Risk Tolerance
Cryptocurrency can be a rewarding and lucrative business, but it can come with its risks. Anything can happen overnight, so you’ve got to be prepared.
Any investor can say something that’ll create a change in crypto and if you’re not careful, your business might suffer a blow that’ll be difficult to recover from.
One way to be in a safe place is to diversify. You can have offers on other financial trading assets that aren’t dependent on or related to cryptocurrencies, this wise move can keep you going irrespective of the ups and downs of the industry.
But in all, always be ready to take risks and adapt to the changing markets so that your business will become successful
10. Promoting your cryptocurrency exchange business
Spread the word about your business. You know clients are the lifeblood of any business. Set up a marketing team, set up a campaign, and utilize every tool that can help your business be in front of the target audience.
Develop a content strategy that’ll create a relationship between your business and your audience. Create an Ad campaign, build an email list, and leverage social media platforms.
Remember, “Doing business without advertising is like winking at a girl in the dark. You know what you are doing, but nobody else does.” — Steuart Henderson Britt.
Launching a cryptocurrency exchange business can be easier when you take the right steps.
Start with planning your business, you need a map in this worthwhile journey. Do all you need to do legally and have an entrepreneur’s mindset, always look out for opportunities to scale, and always be prepared for any unfavorable conditions.
If you need help starting your cryptocurrency exchange business, LiveTrader Engine will give you the right guidance you need.
The journey of a thousand miles begins with one step. You’re ready, take the first step now.
