As we enter into the new year, the crypto ecosystem continues to expand.
With Bitcoin reaching over $30,000 in early January 2021, most cryptocurrencies will further gain widespread adoption in the financial mainstream.
Despite all these milestones, there are still some misconceptions and conflicting messages in the public domain about starting a cryptocurrency exchange business.
In this rapidly evolving landscape, differentiating between fact and fiction is challenging, if not overwhelming. Let's debunk some myths about starting and nurturing a crypto exchange business.
I hope that the information you might learn from this article will provide you with an alternate perspective on building your own crypto exchange business.
Sounds good, right? Then let's get going!
Myth 1: There Is No Need For New Exchanges Since There Is Binance
I chuckle each time I hear beginners say there is no need to start a new crypto exchange because of monsters like Binance lurking on the market. Undoubtedly, Binance and other heavyweight exchanges like Coinbase and Luno are currently de facto leaders in the crypto exchange business. Starting a new crypto exchange that is competitive can give these big names a run for their money.
When Binance was launched in 2017, Zhao Changpeng, the man behind the success of Binance, probably didn't realize that his exchange would grow to occupy the number one spot in terms of trade volume.
Who knows, if you start your own cryptocurrency exchange business today and use Binance's weaknesses and shortcomings as your unique selling proposition, your business just might become the talk of the crypto community in a few years to come.
Myth 2: Only Tech-Savvy People Can Run A Crypto Exchange Business
With the talk of hash rates and halvenings, Fintech security, specialized trading jargon, crypto Twitter drama, and private keys looking like alien code from Independence Day: Resurgence, it is easy to see why it's daunting for a newcomer to start a crypto exchange business.
However, starting a cryptocurrency exchange can be as simple as visiting a faucet to receive free Bitcoin Cash or downloading and using a Bitcoin wallet.
To start a crypto exchange business, you do not have to know a thing about DevOps, Fintech, or Satoshi Nakamoto - the name behind the success of Bitcoin.
All you need is to learn how the crypto market works and the logic behind individual cryptocurrencies as trading assets.
An excellent place to learn about every crypto coin on the market are popular crypto news websites, or the Yellow Blockchain platform, for example. The Yellow platform is a crypto directory where you can stay updated on Blockchain, cryptocurrencies, and crypto trading news.
Myth 3: Crypto Exchanges Are Unregulated and Barely Legal
Since the very start of 2020, the crypto industry has continued to record unprecedented milestones in crypto regulations. From Singapore's Payment Services Act that came into force in January 2020 to Europe's Fifth Anti-money Laundering Directive, there is a strong indication that the issue of crypto regulation would reach new frontiers by the end of 2021.
While some countries were slow and cautious to implement crypto regulations, other countries like the US and Australia took decisive practical steps to regulate the crypto space. As it stands now, there are crypto exchanges that are financially licensed and highly regulated, like Coinbase, CEX.io, and Binance. They comply with laid down regulations in the various jurisdictions that they operate.
You can also set up an utterly legal crypto exchange business and find ways to comply with regulations as stipulated in the country you wish to operate from.
Myth 4: We Only Need DEXs, Not CEXs
Another myth that has discouraged many beginners from starting a cryptocurrency exchange business is that the current market only appreciates decentralized exchanges and not centralized exchanges.
But do you know that centralized exchanges are still the most common means for crypto enthusiasts to buy Bitcoin and other cryptocurrencies?
Besides Binance, there are actually not that many exchanges that offer decentralized service or peer-to-peer trading service.
Most of the exchanges that you know offer only centralized trading service, where you have to deposit your fiat currency in an escrow before you can carry out a transaction. Transactions on decentralized exchanges use atomic swaps and smart contracts.
Myth 5: You Need To Build The Crypto Exchange Software From Scratch
It's the 21st century, and many people still think you need a heavyweight development team in-house to build complex projects. Take a look at GitHub and the open-source Blockchain community's accomplishments.
You can find literally everything on GitHub to construct a Digital Asset Exchange, from crypto exchange software to market-ready trading bots and crypto storage solutions.
You do not need to build the software from scratch. Take a look at Openware's crypto exchange software codebase, for example. It's one of the most accessible open-source Blockchain software solutions on the market. The company can also help you build and deploy specialized Blockchain software if you have a particular crypto business or marketplace in mind.
Myth 6: Development Will Take Years And Millions Of Dollars
This is the last but not the least myth. While big crypto exchange businesses like Binance may have started after raising $15 million from an initial coin offering (ICO), you do not need to break a bank to fund your crypto exchange business.
Additionally, developing a cryptocurrency exchange from the concept stage to the marketing and ICO stage will not take years to achieve.
With a dedicated project team and the right tools in place, you can start a crypto exchange business without piling up millions of dollars to get it going.
However, it would be best if you did your homework to determine the approximate needed costs because you have to consider the expenses on technology, legal counsel, hosting, government registration, as well as your advertising and marketing.
Starting and running a cryptocurrency exchange business is not as difficult as most beginners think.
Do your due diligence to determine what is required to kickstart a crypto exchange business, and you will realize it's not out of reach.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.