Step-by-Step Guide to Starting Your Bitcoin or Cryptocurrency Exchange

EnclaveFX Ltd
Mar 15, 2021

Cryptocurrencies, like Bitcoin and other digital currencies, are becoming increasingly popular. Early Bitcoin investors and miners are sitting on modest fortunes, and the notion is gaining traction.

“During the Gold Rush, most would-be miners lost money,” noted renowned investor Peter Lynch, “but people who sold them picks, shovels, tents, and blue-jeans made a nice profit.” One might compare the makers of picks and shovels to the owners and operators of bitcoin exchanges in the cryptocurrency boom’s gold rush.

This step-by-step tutorial will take you on the proper route if you, too, since the potential benefit and want to establish your Bitcoin exchange firm.

In 10 Easy Steps, Learn How to Start a Bitcoin Exchange

  1. Seek legal advice to ensure that all licensing requirements are met.

    Before you implement a plan into action, one should seek legal guidance to know more about the legal and regulatory requirements for the new businesses. All jurisdictions in which the company wants to operate will require proper licensing. In many places, cryptocurrency exchanges operate with little oversight because government regulations have yet to catch up with technology. In contrast, in others, such as the United States, Bitcoin operators must be licensed Money Transmitter businesses and must adhere to SEC and CFTC rules and regulations, among other things. Legal representation is essential. Because they operate under the currency exchange umbrella, most exchanges must follow Know Your Customer (KYC) laws, which have become increasingly common in fighting against money laundering. As a result of the Patriot Act, these rules have been in force in the United States since 2002. Regulations differ by jurisdiction, so speak with an experienced lawyer with the industry.

  2. Obtain venture capital funding.

    Before you begin your project, you should know what you will be the total cost. A minimum of $135,000 will be necessary to design and launch a bitcoin exchange. This includes technology, hosting, initial legal guidance, government registration, and first advertising costs. While not all finances are necessary upfront, the venture must have sufficient funding to provide a proper runway. One of the most common and silly mistakes startups make failing to prepare for the future, resulting in tiny early fundraising that may cover development expenditures but leave the company without the vital operations funding it needs until it becomes profitable. Startups frequently mistake obtaining licenses from unscrupulous crypto exchange providers who charge ongoing fees and fail to mention the legal duties and costs of setting up and operating an exchange.

  3. Look for a company that offers cryptocurrency exchange software.

    EnclaveFX Ltd offers total custom cryptocurrency exchanges for a one-time license cost that includes no royalties or compensation arrangements. This means there are no fees, clients can host the business themselves, and clients get the total source code, which is vital for auditing purposes because certain regulators seek source code inspection. EnclaveFX Ltd has more than 20 years of experience constructing stock exchanges, including backend technology used by some of the world’s top stock exchanges, and is always looking for ways to offer value to its clients.

    What’s the point of white-labeling source code? White label exchange software with a complete source code allows all customizations of a custom-built exchange while dramatically reducing time to market and total cost.

  4. Link your exchange to others for better liquidity.

    Liquidity is the base step of any required exchange. Potential clients will be skeptical of your new enterprise if you don’t have an order book and trading activity. We can connect your business to a network of current exchanges, improve its liquidity, avoid these hurdles and challenges, and avoid the need to imitate activity using dummy accounts within the new business. Remember that the more comprehensive the network of exchanges, the less liquidity your further discussion would face.

  5. Form a business relationship with the recognized payment processor.

    All payment processors are not formed similarly. Companies will have an extensive range of fee arrangements, among various things. To wrestle with other exchanges, you’ll need the lowest transaction rate. Some other processors include hidden costs in their contracts, so read the deal carefully before signing. Settlement time and compliance with PCI DSS are few in the best and recognized practices for ensuring cyber security, are two more distinctions amongst processors. It’s worth noting that while federal law does not demand compliance in the United States, numerous state laws do. To protect new businesses from cyber dangers, make sure your payment processor is PCI-compliant. This is also another example of how crucial it is to comprehend the complexities of business regulation.

  6. Use the most up-to-date security techniques.

    EnclaveFX Ltd-powered exchanges are the safest globally, with offline cold storage wallets, two-factor verification, and encrypted databases. Furthermore, the EnclaveFX Ltd does not save passwords (only hashes). We’ve written extensively about data breaches such as Mt. Gox and Bithumb, which have become well-known in the industry. What’s the bottom line? Cryptocurrencies have become a hotbed for cybercrime and hacking, forcing exchanges to differentiate themselves based on security.

  7. Go live after the required beta testing.

    Once You’ve created your trade, you’ve also made a deal with a payment processing company. You’ve also gone to great lengths to verify that your exchange complies with all applicable rules and regulations. You’ve assured that your business is safe from cyber-attacks.

  8. Begin a marketing and public relations strategy.

    It’s time to get updated with crypto news publications like daily blog updates of foreign exchanges after your exchange is up and running. To avoid having to scramble for extra funds after your initial raise, it’s critical to properly plan your marketing activities, as well as their expenditures. Many exchanges do not have a marketing budget and rely on free social media promotion to achieve a critical mass of traders.

  9. Assist customers.

    While providing excellent customer service is the final step in creating a successful cryptocurrency exchange, your ability to excel in this area will determine your long-term success. Those who deal with customers must be attentive and satisfactorily resolve customer complaints and technical issues. Customers should be contacted at all the points, so consider using a ticketing system like ZenDesk and staffing it with knowledgeable and helpful representatives who are available 24 hours a day, seven days a week, because cryptocurrencies never stop trading.

  10. Keep a legal team on hand to ensure continuing compliance.

    We cannot put more pressure on the importance of ensuring legal laws, regulations, and compliance and adhere to all latest, present, and proposed rules and regulations, not limited to the jurisdiction in which exchange is based but also in all foreign jurisdictions where your exchange members or traders will reside or conduct trading. Because cryptocurrency laws are continuously shifting worldwide, it’s critical to either engage a full-time in-house legal compliance staff or outsource to renowned law firms to maintain your exchange lawful in all of the countries where you’ll do business.

Naturally, no step-by-step instruction, no matter how comprehensive, will be able to answer all of your questions. However, perhaps, this has assisted you in developing a basic action plan with which you may proceed. As always, the EnclaveFX Ltd team is here to help you on your journey, so please feel free to contact us by phone or email if you have any more questions.