How to Open a Crypto Exchange in 5 Simple Steps

Fifteen years ago, when cryptocurrencies were introduced, only a few predicted their exceptional futuristic growth, probably including Satoshi Nakamoto, the founder and developer of Bitcoin.

Today, decentralised assets play a major role in various industries, paving the way for many businesses to emerge and capitalise on the globality and growth of most crypto coins and projects. Starting a crypto exchange platform is one way to earn from the thriving decentralised economy.

However, developing and launching such a platform has many challenges and considerations. Let’s highlight some crucial aspects before you open a crypto exchange.

Understanding Crypto Exchange Platforms

Cryptocurrency exchanges are websites that enable users to buy, sell and swap virtual coins, tokens, stablecoins and other digital assets. They work similarly to the conventional foreign currency exchange kiosks but for decentralised coins, despite offering fiat-to-crypto conversions.

When Bitcoin started gaining popularity between 2010 and 2013, there were only around 50 digital coins. This number grew phenomenally, and today, 10,000 cryptocurrencies exist, which is arguably even beyond 20,000.

When you open a crypto exchange software, you have vast opportunities to offer buying, selling and converting many blockchain-based currencies in exchange for a commission fee as a percentage of each transaction.

Binance, Coinbase, and Uniswap are some of the largest exchange platforms, and they span thousands of digital assets and millions of users in daily operations and transactions.

Why Do You Need to Open a Crypto Exchange?

Paying with Bitcoin is faster and more affordable than traditional bank transfers for a multitude of reasons. Decentralised transactions involve fewer intermediaries and are processed directly using automated mechanisms, making them quicker and more cost-effective.

These factors have encouraged more users to switch to DeFi assets and digital means of transactions, favouring rapid payments and elevated personal data security.

Therefore, building a crypto exchange allows you to capitalise on these growing trends and earn a cut from the massive number of blockchain operations.

Types of Cryptocurrency Exchanges

Offering the opportunity to convert virtual currencies seems like a straightforward business model. However, we will explain a few types of exchanges below.

Centralised Exchanges

This is the most common type of exchange, where the server works like an intermediate that matches coin sellers with buyers. These custodian platforms store users’ digital assets and perform transactions on the user’s account wallet.

Centralised crypto exchange software allows users to buy BTC using fiat currency and offers a crypto trading platform for investors.

Examples: Binance and Kraken.

Decentralised Exchange

These are the 2nd most popular exchange types where no third-party entities are involved in the storing and handling of transactions. Instead, users buy and sell cryptocurrencies by connecting their Web 3.0 wallets on the platform.

Also called non-custodial platforms, they do not hold the user’s digital assets and offer limited trading and liquidity options.

Examples: Pancake Swap and Uniswap.

Peer-to-Peer Exchanges

P2P platforms allow users to connect and exchange currencies directly, similar to decentralised exchanges. However, the main difference is that operations are conducted using escrow services, ensuring one side’s order is fulfilled after the other party delivers their offer.

In other words, they guarantee both parties to receive what they are looking for at the agreed price, promoting fairness and transparency.

Examples: LocalBitcoins and Paxful.

Instant Exchanges

Instant exchanges serve a simple functionality, swapping one cryptocurrency for another for a commission fee. These platforms do not store users’ assets and do not require the setting up of an account.

Instead, users can connect their wallets and exchange their owned virtual coins and tokens for other assets supported by the platform.

Examples: Changelly and SwapZone.

Open a Crypto Exchange in 5 Steps

If it is the first time you open a cryptocurrency exchange business, you might get intimidated by the overwhelming steps and factors you need to consider. 

However, in this fast-paced industry, it is crucial to start a crypto exchange business quickly to become competitive with a considerable number of crypto market participants. Therefore, we simplify this process with the following 5-step guide.

Create a Business Plan

The first step is to craft a business plan, which includes identifying your target market, exchange platform type, the countries you want to serve and how you will promote your business.

This step is crucial to attract investments to your business and raise capital. Moreover, some jurisdictions require a multi-year business plan before issuing a business permit.

Your plan must include your profitability model, how you will serve your customers, what software you want to use, and how you will source liquidity and technological solutions.

Review Local Regulations and Get a License

Crypto regulations vary widely between countries. Therefore, before you open a crypto exchange business, familiarising yourself with local rules about decentralised finance and digital assets is crucial.

This is also crucial in determining your target market. For example, South Africa has just recently started issuing crypto exchange licenses, while dealing with Bitcoin is banned in Qatar and China.

You must also register with the local financial regulator and hire a compliance team to ensure ongoing adherence to applicable laws. Getting a crypto business license is crucial to spur confidence in your platform and attract more clients to use your services.

Determine Your Crypto Exchange Features

Strategise on the services and features you want to offer your clients. This may include signup bonuses and promotion packages to lure clients and increase your lead conversion rate.

This helps you understand what you require to create a crypto exchange platform. Conduct market research on the most-demanded services, whether you want to allow your customers to buy, sell, trade, swap, or invest with cryptocurrencies and other custodial capabilities and customer support functions. 

Start Developing Your Cryptocurrency Exchange

There are two ways to create a crypto exchange platform. You can build the system from scratch or hire a white-label solution provider to equip you with pre-built software. Let’s explain the difference between them.

In-house Development

Relying on internal resources to design an exchange platform offers flexibility in the build. You can enjoy maximum control over the process and the features you want to add.

However, in-house crypto exchange development requires significant time and money to locate, hire, and train qualified employees. Additionally, a prolonged testing and quality control phase will extend the entire process to months before launching your crypto exchange business.

White Label Development

White-label companies are developers who provide pre-built templates that require customisation and branding before being integrated for your business use.

These turnkey solutions shorten your time to market, allowing you to open a crypto exchange quickly and start making money faster than months of development.

WL providers offer technical support, onboarding and server hosting, allowing you to focus on your core business operations. In exchange, they charge different costs to start a Bitcoin exchange, which can be a one-time payment or recurring annual fees.

Test and Launch Your Exchange Platform

The final step is to test your platform, ensuring that features work as intended and the server runs smoothly without downtime or crashes.

You can release your cryptocurrency exchange business only after thoroughly testing your exchange software and conducting several preliminary launches. This should be accompanied by a marketing campaign to spread the word about your website and encourage investors and crypto communities to use your platform.

Conclusion

Building a crypto exchange platform can be overwhelming and intense. You need to consider many things from a legal, technical and business perspective. However, if managed properly, it can be highly lucrative.

Using our five-step guide, you can open a crypto exchange platform quickly and effortlessly. Start by planning your business, reviewing the legal, determining the software features, developing the design, and launching your platform after successful testing rounds.