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A Bitcoin exchange can be launched in six simple steps:
- Choose the location of your business.
- Learn about the applicable rules in that location.
- Join forces with a bank or a payment processor
- Establish the exchange’s transaction history and liquidity.
- Implement recommended security measures
- Present assistance to clients
Decide on the operational parameters of your exchange
Depending on your operational scope, you will often need to obtain the proper licensing and approvals for your company to launch a bitcoin exchange, whether you wish to operate globally or restrict yourself to a specific region or country. The licensing process and adherence to local laws and regulations should be discussed with a legal expert because laws differ from one location to another.
Review the nation’s laws and reporting obligations
Nearly all governments demand that businesses engaged in currency trading abide by the Know Your Customer (KYC) standards. KYC is the procedure by which a company confirms the identity of its customers using ID cards or passports that have been granted by the government. The fundamental objective in this situation is to prevent money laundering. Ensure that you follow the KYC regulations in your nation and incorporate a suitable customer verification process into your exchange. Otherwise, you might one day be perplexed as to why the cops are suddenly stationed outside your door.
Join forces with a bank or a payment processor
To process payments made in fiat currency, you will need to collaborate with a bank or payment service provider. A wise idea is to select a reputable bank with a wide range of online services. This is more important in emerging and developing nations since the majority of banks lack the ability to start a quick bank transaction online. Settlement of transactions could take up to two days. Your customer will benefit from the convenience of working with a bank that offers quick clearance and settlement of funds. Fiat money can be added and removed automatically through a payment channel or even manually through remittance.
Boost Trading Volume on Your Exchange
Liquidity is necessary for any exchange to run smoothly. Customers are reluctant to make orders or even deposit money without a full order book and active trading. Naturally, liquidity problems arise on new exchanges. Three tried-and-true methods exist for boosting your liquidity:
You can imitate trading activity by making purchases and sales between two fictitious accounts within your exchange. You can implement an API interface to link your bitcoin exchange with another active exchange.
You can join a network of exchanges for cryptocurrencies, such as Trust-Deposit, which will connect the liquidity of all exchanges in its network. The liquidity is better the more extensive the network.
Assure the highest level of security for transactions and customer information
To guarantee that the funds of the exchange operator and his traders stay secure, any exchange needs top-notch security. This should also apply to your client’s sensitive information, such as their bank account and KYC information. There have been security breaches at various exchanges, including the infamous Mt. Gox breach, where the breach went unreported for years and resulted in the theft of roughly 1% of all bitcoins at the time. A Reuters article claims that a third of all bitcoin exchanges from 2009 to 2015 were compromised. The important lesson is that security must come first in your exchange.
Create channels for customer support
Another crucial element of a good exchange is customer assistance. Staff is required for various tasks, including reviewing KYC requests, responding to customer complaints, processing fiat currency deposits and withdrawals, etc. A quick customer service system ensures they may begin trading and earning money for your exchange as soon as a customer signs up.
You need software to run a bitcoin exchange successfully. Bitcoin trading software is a fully supportive software in mining cryptocurrency. It can be difficult and perplexing technically to start a Bitcoin exchange, but it doesn’t have to be. Starting a crypto exchange has enormous financial potential when considering the rising global demand for digital assets and trading infrastructure.