You want to start your Bitcoin exchange, but don’t know where to start? Well, you have come to the right place. This article intends to clarify which things you need to consider before you want to launch your own Bitcoin/cryptocurrency exchange, how the internal architecture of exchange software should be structured, and most importantly, where to get your exchange software.
How to Start a Bitcoin Exchange
1 Establish the operational scope of your exchange
Whether you
want to operate globally or confine yourself to a specific region or country,
you will usually be required to get the necessary licensing and approvals for
your company to open a Bitcoin exchange according to your operational scope.
Laws vary from place to place; hence, consult with a legal expert regarding the
licensing and compliance with local laws and regulations.
2 Review the country’s regulations
and compliance requirements
Almost all
governments require entities that are involved in the currency exchange
business to adhere to the Know Your Customer (KYC) norms. KYC is the process
whereby a business verifies the identity of its customers through government-issued
ID cards or passports. The main purpose here is to discourage money laundering.
Make sure you adhere to your country’s KYC norms and integrate a suitable
customer verification procedure into your exchange. Otherwise, you might be
wondering someday why the police are suddenly standing in front of your door.
3 Partner with bank or payment
processor
You will
need to partner with a bank or payment provider to process payments via fiat
currency. Choosing a trustworthy bank with a host of online facilities is a
good choice. This is more relevant in developing and under-developed economies
where most banks do not have a facility to initiate an instant bank transaction
online. Transactions may take up to two days for settlement. Partnering with a
bank that has fast clearance and settlements of funds will provide convenience
to your customer. Adding and withdrawing fiat funds can be automated via
payment gateway or even can be done by manual remittance.
4 Create liquidity on your exchange
Any exchange
needs liquidity to operate successfully. Customers are hesitant to place orders
or even deposit funds unless they see a full order book and trading activity.
New exchanges naturally encounter liquidity issues.
5 Ensure high-grade security of transaction and customer data
Any exchange needs top-notch security to ensure that both the exchange operator’s and his traders’ funds remain secure. This should also apply to your customers’ private data which includes their KYC details and bank account information.
We hope that this article has clarified some misconceptions and will help you better
understand the framework behind a Bitcoin exchange. You can also read more
about our exchange software solution to learn how white label exchanges work
and how to get started.
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