The world of Bitcoins & Cryptocurrency is in a big Boom now. Nearly everyone out there is in a rush to invest in Bitcoins and cryptocurrency. No better time to start your own Exchange. In this post lets look at how to start a bitcoin exchange business.
Step 1: The right country to start.
Yes Sir. This is the most important step. The governments across the globe are scared of this new type of alternate economy taking over. And for obvious reasons, many governments are making the rules difficult to run a Bitcoin exchange business. On the other side, there are countries that see this as an opportunity and help entrepreneurs to start a cryptocurrency business easily.
Tip: look at countries like Netherlands, Estonia etc. as they have come up with special business categories to register your exchange under.
Step 2: The right Audience for your Exchange.
This point may sound weird, but can make all the difference. There are now like 70+ exchanges around the globe and a majority of these exchanges accept only customers from developed nations. All the investors from other African, Asian and middle east countries are rejected. Even the exchanges that are started in these countries have closed registrations due to the flood of applications that have come in the past couple of months ( a small exchange that I know of has started getting 20,000 registrations per day and have closed new registrations ). So, you have millions of people out there who can immediately become your customers and transfer money to your Bitcoin exchange.
Tip: In countries like India, Africa, Indonesia, Kuwait etc. there are millions of people who want to invest in Bitcoins. A majority of them just want some exchange that can help them buy now. They are like ” Please take my money now”.
Step 3: The right Bank to go with.
Please do a bit of research on the right bank you want to associate with. Even banks in developed countries are very cautious of Bitcoin exchange business for reasons they themselves dont know. Have a clear word with your bank and tell them very clearly on the type of money your account will receive ( as believe it or not, as soon as the left-out population knows that your exchange allows them to buy crypto-coins…they will come in huge chunks ). In countries like India etc. banks are continuously banning accounts of Crypto exchange businesses. If your bank bans your account midway, you will be in a sudden bottleneck situation. So choose your bank wisely.
The other option is to speak to a couple of Fintech startups or payment gateways in your location. The success of any Fintech startup is based on how much transactions happen on their platform. There main revenue stream is from the fee they charge for each transaction. Offer them a commission they cant resist & all your headache is taken care of.
Tip: search for the small banks that are washed out in the competition with other big banks. They will be hungry for business of some kind. Speak to a top official and make a deal with him.
Step 4: The right Bitcoin Exchange Software to use.
The right time is Now. You need to hit the road running now. Find for a ready-made software that can help you start a bitcoin exchange business instantly. There are many ready made Bitcoin exchange scripts being sold by vendors, using which you can instantly setup a bitcoin exchange in no time. If you plan on involving a Bitcoin Software development company and develop your solution from scratch, you may miss the bus. And it may easily cost a fortune to develop it. Not to mention the time.
Tip: Checkout this ready-made Bitcoin Exchange script from BitExchange Systems. Have heard from many that it is the most Secure script in the market and works like a charm. The best part is its FREE. For those who need installation help, the company provides expert installation service for a fair cost. The software also has all the essential features.
When choosing the Cryptocurrency software for your exchange, see that the product has both P2P exchange option and Normal Exchange option available ( More about this explained in the FAQ section at the bottom ).
Step 5: The right Bitcoin Wallet to employ.
Ok. You have chosen the right country, The right Bank, The right Software. Now people have started buying bitcoins on your platform. You need to make sure the bitcoins stored inside your Online Bitcoin exchange is safe. For this you will need to implement 2 types of Wallets: A Hot Wallet & a Cold Wallet.
The Hot wallet or the warm wallet is part of your Online Bitcoin exchange software and a very minimal number of Bitcoins or Cryptocurrenices are stored here. Only the required number of coins that is used for the current transactions your customers are doing. In the worst case scenario, even if your exchange is hacked… only the little coins present in the Hot wallet is lost.
A Cold wallet is like a physical device that is always un-plugged from your Online Bitcoin exchange. The majority of the bitcoins are stored in the cold wallet that is safe from any hacker. The Bitcoin software you employ is programmed to automatically take out only the minimal number for bitcoins required for transactions and store it in the Hot wallet and send back bitcoins to the cold wallet.
Tip: The above Bitcoin software from BitExchange Systems offer a configurable Cold wallet as well.
Hope you got all the information on how to start a bitcoin exchange business. Please do let us know of any questions you have in the comments section below. Happy to help 🙂
What is a P2P exchange?
In a Peer-to-peer (P2P) exchange the users of the Bitcoin exchange directly buy and sell cryptocurrency among themselves. Usually an escrow is involved in-between the buyer and the seller. This escrow is managed by the Exchange inself. In a normal exchange, the exchange is the intermediate between the buyer and seller and charges for each transaction. The exchange also procures bitcoins from the market outside and sells it to their users for a gain.
How to setup a bitcoin exchange?
Unlike other software applications – to setup a bitcoin exchange, you will need fair amount of knowledge in this vertical. Apart from setting up the usual website and backend, you will need setup some complex stuff. For each Alt-coin in your Cryptocurrency exchange you will need to setup the respective Blockchain and configure the API’s with the respective server. Also you will need to setup the Bitcoin’d server and connect it with the rest of the platform. To setup the P2P exchange, you will need to also setup the required threads. Finaly to setup a bitcoin exchange, you will need to connect a payment gateway or Bank to make the Deposit and withdrawal of funds feasible.
How to start a bitcoin exchange business that accepts more than one cryptocurrencies?
One of the main points to discuss in this questions of How to start a bitcoin exchange business is Alt-coins. For each alt-coin that you will need to launch in your cryptocurrency exchange, you will need to integrate the respective coin by working with their API’s and blockchain’s.
How to start a bitcoin exchange business in India?
Many say starting a bitcoin exchange business in India is illegal. But in our research if you get the proper permissions from the ROC and the government, it can be started. The main thing to note when starting a bitcoin exchange business in India is the type of company registration you do. Since this nature of business involves collecting money from the public, you would need to consult an auditor and register your business under the correct category. You will need to adhere to all the legal policies and process the government puts forward. You would need to do a strict KYC verification process and maintain the records for anytime inspection. Also you will required to furnish any documents the law expects. So maintaining proper records is a key.
Also another issue you will be facing when starting a bitcoin exchange business in India is the Bank accounts. You will need to choose the right bank for you and speak in detail with the bank officials and explain your nature of business. Let them know very clearly about the type of deposits you are expecting and ask if their bank would allow these type of transactions. After that you will need to make your decision.
Note: The above answer on How to start a bitcoin exchange business in India , maybe wrong based on the date and time you are reading. As the law might have changed. Dont take our word, as our knowledge is limited based on the news we read. Please consult with a lawyer and a auditor before making a decision.