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Crypto Business: How to Set Up an Exchange in 6 Steps

Navigating through the volatile and new digital assets class can be challenging even for industry veterans. Building, maintaining, and running an exchange is considered one of the most daunting tasks. That’s why we’ve made this article to simplify this process for you. Here are the six main steps you need to take.

Step 1: Choose the Way to Build Your Exchange

In general, there are two ways one can set up a crypto exchange. The first is to build it from scratch. This process includes establishing experienced development, management, and operations teams, and then building a robust technological solution that is secure and scales efficiently; this process can take between one to two years.

The second one is to use a readily available technology solution. This option is easier, quicker, and often-times cheaper. However, when choosing a white-label software provider, one should consider a few key factors, which we’ve outlined in this article. In general, some solutions can lack important features, so it is necessary to approach the choice responsibly.

Step 2: Establish a Target Market

Secondly, one should define the countries and customers you want to reach. This will include investigating the legal requirements of the region — one should be aware of the legal obstacles and how to work them out early on.

Pay attention to the following factors:

  • The state’s attitude towards cryptocurrencies;
  • Terms of cryptocurrency business registration;
  • Political/economic stability;
  • Cost of services and requirements.

Step 3. Define the Exchange’s Architecture

The exchange structure can vary, but it often includes these basic parts: matching engine, user interface, admin panel, and wallet. During this step, one should also consider defining the trading pairs, APIs, interface customization, trading fees, third-party integrations, KYC requirements, etc.

Step 4. Find a Liquidity Provider

Liquidity is one of the most important factors that will ensure your competitive advantage among other crypto exchanges. So, be careful when choosing one, because having shallow liquidity will result in order book imbalance, high volatility, wide price spreads, and slippage.

Here are key factors to focus on:

  • Price spreads;
  • Market depth;
  • Order execution speed;
  • Compliance with AML and other regulations.

Step 4. Guarantee Security

It’s one of the most important steps in establishing a crypto exchange because to succeed in this industry one should make security the top priority.

During this step, one will need to organize custody for the users’ funds and structure custody operations.

Moreover, to provide the necessary security levels, one should keep an eye on up-to-date security technologies, as hackers never stop developing new tools and strategies. Some basic security features include:

  • 2FA/MFA authentication;
  • Cold and hot wallets usage;
  • Database Encryption;
  • Wallet whitelisting feature;
  • KYC and AML procedures.

Don’t forget to conduct security audits and penetration testings to ensure that your exchange complies with the necessary security standards. One of the most suitable type of audit for crypto exchanges is the System and Organization Control 2 (SOC 2) audit.

More about cryptocurrency exchange security features here:

Step 5. Launch your Cryptocurrency Exchange

When your exchange is tested, it is ready to enter the market. From now on, maintain your platform, monitor traffic, respond quickly to customer inquiries, and optimize the marketing approach.

Thank you for reading!

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Scalable Solutions

Scalable Solutions

Industry-Leading White Label Institutional Grade Trading Software.