Opening an Exchange Business? Read This First
Running a cryptocurrency exchange is one of the trendy businesses that many see as a lucrative and exciting opportunity to jump on.
And why not? The exchanges are making a lot of money (at least the good ones), even in the bear markets.
Yet, most of the people that want to start a cryptocurrency exchange, don’t quite realize that it takes a considerable amount of effort and capital to get it off the ground.
As with any business, cryptocurrency exchange also requires a good team. And to build a competitive and successful exchange, a really good one. People with different capabilities have to be included.
It’s not a one-man operation. You need a marketing manager, operations guy, software development and a tech support, a compliance team, and a customer support. Someone to work on partnerships with these crypto projects. Finance guy. Most importantly, someone with trading/exchange experience.
You absolutely can not build a feature-rich exchange without having any kind of trading experience in the team. You just don’t know what the traders are looking for.
You may be thinking that it’s a simple exchange, with the simplest features. Fair enough, it could definitely work, especially if you have a good channel to reach to your customers and audience.
However, traders bring volume. They want certain features. No volume, no business. It means there aren’t buyers. If there aren’t buyers, then there won’t be sellers. And vice versa.
Ok, it’s possible to skip one or few aforementioned parts of the equation. For example, there are quite many different ready-to-go software solutions on the market. No development team needed. It can work, yes, but these solutions aren’t cheap. At least not the good ones, where you have a good user interface and security features built in.
Hence, financial capability is another key factor. For marketing, for hiring, for developing and compliance. It’s very difficult to build a successful exchange business with 2000€, 5000€ or 10 000€ budget.
If you have the team and financial capabilities in place, you can take the next step: setting up the company and get licensed.
Some may argue that it’s easier to operate from an offshore jurisdiction, where no licensing is needed. While it can be true at first, you’ll soon find out that there are very few, if any, banking options available for such companies. Moreover, people don’t usually trust shady jurisdictions.
Hence, having a license in the EU is not only a compliance issue but also a marketing investment.
When drawing up your exchange business plan, here are some of the features to think about:
Security and trust
No one wants to risk their money, safety is the most important thing to the clients. Safety is also a reason behind Coinbase success, as Coinbase is seen as a safe harbor among a sea of suspicious crypto exchanges.
Another key to the Coinbase success. Also, think about Binance. Binance is very easy to use, compared to, for example, Etherdelta. Clients always, regardless of the service, want to have as little complexity as possible.
Good customer support creates trust. Especially, as you’re an unknown service provider.
Coin selection and volume
People want to buy a number of different coins. Many people just register as a user to certain exchanges to have the possibility to buy a certain coin. And, of course, they need sellers and buyers to be present on the market.
Very few exchanges have good mobile apps. People do everything on mobile.
You can’t charge considerably more than your competitors unless you have a better value proposition.
Marketing and good channels to the customers are priceless. If you know nothing about marketing, then it’s a hard battle to win.
Who are you targeting? Is your niche narrow enough, so you can position and target properly? At least the territories and languages should be chosen at a bare minimum.
How can we help?
We help our clients with regulatory services, such as obtaining the cryptocurrency exchange and e-wallet licenses, but also with the payment institution and e-money licenses, which allow our clients to do a wider scope of activities with the fiat-money.
Additionally, to our exchange clients, we introduce different prominent cryptocurrency projects that may be listed on the exchange.