After Western payment systems chose to disassociate themselves from the Russian market, Russians have been turning to using cryptocurrency more frequently for online transactions. They now rely on crypto exchanges to convert their crypto into traditional fiat money. It's fascinating to see the rise in interest in crypto exchanges among Russians, especially when they search for the term 'best change' on Google. In fact, there are currently around 70 000 people each month who show interest in crypto exchanges, and that's just based on one search query.
With this growing trend, it's no wonder that many people are considering opening their own crypto exchange. Entrepreneurs and business-minded individuals are already paying attention to this sector, and the interest has only grown stronger in 2022.
In this article, we'll walk you through the process of starting your own crypto exchange, highlight important factors to consider, and even share tips from a successful crypto exchange owner.
How to Open Your Crypto Exchange: the Theoretical Part
Let's start with the theory because, in reality, everything seems simple: you create a website, list trading pairs, and you're good to go.
The first thing you need to decide is the type of exchange you want to operate. There are three types:
- Manual: In this type, all operations are performed by an operator.
- Semi-automatic: Some operations are handled by an operator, while others are processed through a special program.
- Automatic: Everything is processed using dedicated software.
Running an automatic exchange is more convenient because it solves two problems at once: the exchange works without delays, and you don't have to pay extra salaries to employees.
Most modern crypto exchanges are automatic or semi-automatic, but new ones can still be manual. In such cases, a single person usually handles exchanges, customer support, and maintenance.
Once you've chosen the type of exchange, you have three options:
- Buy a ready-made template for a crypto exchange. This option starts at $5 000, but it offers limited functionality and standard service.
- Order a custom-built crypto exchange from scratch to meet all your requirements. This option costs $10 000 or more. However, even after selecting the format and template, it's still too early to launch the site and target customers.
- Contact Finector. This service offers to launch a pre-built cryptocurrency exchange business, allowing you to earn at least $5 000 per month. It's like a crypto-franchise that takes care of organizational matters. You provide the investment and desire to earn, while Finector provides a ready-to-go business, support, and training.
What You Need to Know Before Opening Your Own Crypto Exchange
To successfully launch your own cryptocurrency exchange service, you must consider the following:
- Selecting the right country to register in: This is more complicated than opening a regular casino. The laws and tax regulations depend on the jurisdiction you choose. It is important to comply with local laws and regulations to avoid legal issues. For example, you cannot open a crypto exchange in the United States and violate local laws.
- Studying the applicable laws: Many states require a license to operate a crypto exchange. Obtaining this license can be challenging. It is important to study the legal requirements of the countries you plan to work with to ensure your operations are fully compliant.
- Preparing the necessary documents: The list of required documents varies depending on the country. It is advisable to seek assistance from local lawyers when opening your own crypto exchange. This will save you time and money in the long run.
- Finding suitable software and hardware: Some software and hardware can be rented, while others need to be purchased. However, when renting a server, for example, there may be potential risks to transaction security. It is important to carefully consider the safety and security aspects of the technology you choose.
- Prioritizing security: As you will be dealing with money and personal data of clients, it is crucial to plan in advance how and where you will securely store this sensitive information.
In theory, the cost of setting up a simple cryptocurrency exchange starts at $10 000. However, practically, the expenses can be much higher.
Which Is the Best Country to Open and Register a Cryptocurrency Exchange?
The choice of country for opening a crypto exchange is crucial to avoid legal complications and government regulations. While the United States, China, and Switzerland are considered more lenient towards cryptocurrency, they may not be budget-friendly options.
Some simpler options include:
- Estonia: Cryptocurrency is not regulated in Estonia, which makes it an attractive choice for many exchange operators.
- Lithuania: Digital currency transactions are allowed in Lithuania, and the industry is regulated by the state. A license is required to operate a crypto exchange.
- Malta: Known for its popularity among casino owners, Malta is also favorable for crypto exchanges. However, obtaining a license requires opening an office in the country and proving your income.
- Cyprus: There are no restrictions on crypto payments in Cyprus, and there is no income tax.
- Portugal: It is relatively easy to obtain a work permit in Portugal.
Other countries such as Japan, the Philippines, the Czech Republic, the Cayman Islands, and Singapore also offer favorable conditions for establishing a crypto exchange.
How Much Do Crypto Exchange Owners Earn?
Finding precise information about income from cryptocurrency exchanges is challenging as there are no comprehensive studies or statistics available. According to some reports, exchange operators can earn anywhere from several hundred to several thousand dollars per day, depending on the transaction volume and commissions charged.
We managed to speak with an owner of a crypto exchange who preferred to stay anonymous. He shared insights into the earnings. He mentioned earning $5 000 - $6 000 per day.
"You can earn $ 5 000 - $6 000 in a day," the owner of a crypto exchange, who wished to remain anonymous.
Q: Hello, could you please tell me how long the exchanger has been operating? Have you managed to make a profit or are you still in the break-even stage?
The exchange started its operations in 2019. Initially, we started small with websites and automated scripts, but like everyone else, we also provided manual services through Telegram.
We began developing the web interface in 2020. Speaking specifically about the payback, yes, we have achieved it. Both the initial investments and the monthly expenses are covered.
We recently launched our most trusted Facebook setup in 2023, without any hold fees.
Q: What inspired you to open your own exchanger? How long did it take from the initial idea to its implementation?
It all began with a personal interest in exchanging cryptocurrencies for fiat currencies at more profitable rates than what was available on the market. Eventually, friends and acquaintances started approaching me with exchange requests. At that time, we focused on a niche where most payments were made through less popular methods like Webmoney, PerfectMoney, PayPal, and others.
After about a year of working in this space, we realized that this hobby was generating a significant portion of our income, which led to the idea of establishing an exchange service.
Q: What is the highest profit you have earned during the operation of the crypto exchanger?
Profit is a delicate matter, especially in this industry. Difficulties arise due to the nature of calculations and the volatility of the market. For instance, you can earn $5 000 to $6 000 in a day, but end up spending most of it on advertising or office expenses, leaving only $500 as net profit. On another day, the office may earn 50 000 rubles, but it doesn't translate into net profit.
Profitability in this field depends on market dynamics and instability. Traditional exchanges, like converting 150 000 rubles from Sberbank to USDT or vice versa, rarely bring more than 500 net rubles to the exchanger.
However, more unique requests, especially those involving collaborations with accounts in other countries, can generate up to 1% net profit in our favor. Such cases require creative thinking and are not as straightforward as traditional exchange transactions.
Q: Is it difficult to establish your own exchanger? What are three unspoken challenges that one may encounter?
The difficulty of establishing an exchanger depends on the approach and budget. You can build everything from scratch or seek turnkey solutions from specialized services at a higher cost.
Three unspoken challenges are:
- Building a client base, especially in the initial stages.
- Finding trustworthy employees.
- Getting listed on reputable monitoring platforms like Bestchange and similar platforms.
Q: In which geographic region does your exchanger operate? How did you choose the country to work in?
We primarily operate in the Russian Federation and neighboring friendly countries. We have partner offices and distribution points in popular destinations.
The choice of country was straightforward. We leveraged the opportunities available in the region where we were born and had connections. There are ample opportunities in every aspect of the business. The decision of where to work is based on the ability to facilitate transactions and establish a client base.
Q: How challenging is it to promote an exchanger? What methods of promotion did you use? Did you engage affiliates?
We chose the most challenging yet effective path. The majority of our regular clients came through recommendations from satisfied customers who had previously worked with us.
Although we experimented with advertising in specific platforms, the results were inconsistent due to the abundance of scam exchangers and market saturation. Forum participation is also crucial to ensure our exchanger appears active when searched on Google. The number of mentions plays a significant role in our field.
Q: How much money is required? What are the main expenses?
The amount of money required varies depending on the approach, attention to detail, speed of setup, and personal ambitions. Expenses include website development, licensing, domain fees, and other minor expenses. Additionally, there are various costs ranging from office expenses to advertising. It's important to have sufficient reserves to cover stuck payments or unfavorable market conditions.
For cash exchanges, keep in mind that most clients prefer working from an office, so you need to have sufficient fiat or crypto funds for such transactions. Each person should calculate the payback for themselves.
Q: Is it possible to operate at a loss? What does it depend on?
Operating at a loss is possible and sometimes necessary due to the highly competitive and occasionally unfair market. To build a reputation, you may need to accept zero or negative earnings, cover client losses in cash transactions, or handle scams. The key consideration is how much these setbacks will cost you.
Q: How much time do you personally spend on the exchanger per day? How many employees do you have, and what are their roles?
I don't spend a significant amount of time on the exchanger. I have another business that requires more attention, but I try to maintain a balance.
I cannot disclose the exact number of employees, but we have fewer than 10 people working for the Russian division. The team consists of experienced individuals who have been working together on other projects for over 5 years.
The employees handle all operations on online exchanges. While some processes are semi-automated, supervision is necessary. The most critical aspect is managing cash transactions, which can be risky. It is challenging to find trustworthy individuals when dealing with large sums, and experience and trust are earned through trial and error and occasional financial losses.
Q: Does the exchanger's profit depend on cryptocurrency exchange rates?
The exchanger's profit is directly dependent on the client base and not primarily influenced by cryptocurrency exchange rates. As an example, before the Ethereum fork and during the "golden" years of mining, there was significant exchange activity, especially when the value of Ethereum was rising. However, currently, Ethereum exchanges account for only about 3-4% of the total exchanges. The popularity of different cryptocurrencies varies, with some individuals purchasing cryptocurrencies during downturns or focusing on less popular coins for NFT projects, mining farms, games, and more. On the other hand, stablecoins like USDT consistently attract exchanges.
Q: Which currency pairs are most frequently exchanged? And which ones are less common?
The most popular currency pairs for exchanges are USDT and BTC, followed by Solana, and lately, we have received many requests for TON. However, it's important to note that Tether and BTC account for more than 80% or even 90% of all exchanges.
Q: What user data do exchangers store, and how is it stored?
Exchangers either do not store any user data or, in the case of registered accounts, they store email addresses and a general list of exchanges associated with the account. This allows us to calculate individual discounts.
We rarely request photos of cards, passports, or other personal information. Such requests are usually made when there are suspicions of scams or for high-risk transactions that require AML tests. Crypto assets with a high-risk score are not accepted at all.
Q: Do you differentiate between "clean" and "dirty" cryptocurrencies?
Yes, we categorize cryptocurrencies as "clean" or "dirty." We have an AML service that checks all incoming payments when clients enter their crypto wallet addresses. If the risk is high, we decline the transaction. We do not exchange funds derived from illicit or suspicious activities, even if a higher fee is offered. It is our principle to maintain integrity and avoid involvement in questionable financial practices.
Q: Are any licenses required? How difficult is it to obtain them?
As of now, there is no specific licensing required in Russia for cryptocurrency exchangers. However, certain rules need to be followed, including AML compliance, adhering to tax legislation, and other financial requirements. It is advisable to consult a lawyer specializing in cryptocurrencies and financial law to ensure compliance with all regulations.
Q: How common are scammers in the crypto exchange industry?
Yes, there are scammers present, including those who operate through platforms like Avito and attempt to deceive victims by providing false information or canceling transactions. We have encountered similar cases where scammers used our exchanger as a medium for fraudulent activities. Although we suffered financial losses, we resolved the situation by learning from it.
Q: What are the risks involved in opening your own exchanger?
It is up to each individual reader to draw their own conclusions regarding the risks. I have already described some potential situations that may arise. It is essential to prioritize your safety in every aspect. It is worth noting that the operation of crypto exchangers in the Russian Federation is still considered a "gray" area, which entails certain consequences and uncertainties.
Q: On average, how much money passes through your exchanger per day?
It is challenging to provide an exact average figure. However, our record shows a single trade amounting to $2.2 million.
Q: Considering the current level of competition, does it make sense to open your own exchanger?
If you decide to proceed, be prepared for hard work and think carefully about strategies to attract and retain customers.
Conclusion
Starting your own crypto exchange is an expensive and challenging mission. It is important to have a clear understanding of the market and choose the right currency pairs to work with. Also, you must prioritize the security of both your clients and yourself. The initial budget required for implementation alone is at least $10 000, and it is advisable to have reserves and contingency funds available.
