How Much Does a Crypto Exchange Business Cost?
Launching an exchange is one way to penetrate into the crypto market and offer much-needed services like trading and swapping digital assets. However, it is easy to get overwhelmed with the abundance of information and vendors when creating your first crypto business.
You must consider a lot, especially with the dynamic nature of the market and the highly volatile cryptocurrencies. Today, we will go through all the elements of creating a crypto exchange platform and the associated costs.
Centralised vs Decentralised Exchanges
An exchange platform is a website or application that allows users to trade currencies with each other. These activities happen when a buyer wants to forgo fiat or virtual money in exchange for Bitcoin.
In this example, the user will process a buy order, requesting the platform to find another participant willing to sell Bitcoin at a suitable price, considering the big-ask spread and intermediate fees.
When the transaction concludes, the operator receives a predetermined fee, which can be a fixed amount or a percentage of the traded value.
However, there are different modes of exchanges between centralised, decentralised and hybrid. Let’s explain the differences.
Centralised Exchanges
Coinbase and Binance are examples of centralised platforms that use a dedicated server to scan multiple order books and pools to execute trading orders.
They have integrated wallets that users can access when logging in, and every operation is governed by the platform, with different fees determined by the intermediate.
Decentralised Exchanges
Uniswap and Pancakeswap are examples of decentralised platforms that run transactions directly on the blockchain, leading to some delays and liquidity issues.
However, they are highly secure because they do not involve a 3rd party observer and allow users to integrate their wallets for fund storage and better control.
Hybrid Exchanges
Hybrid platforms combine DEXs and CEXs to deliver a unique offering. They utilise advanced security features, such as non-custodial wallets for safer storage settings and centralised execution engines to ensure fast transactions and optimised liquidity.
How to Create a Crypto Business?
You have three choices when creating your crypto platform. You build from the ground up, customise an existing code or use a pre-built platform and rebrand it as yours. The choice between them depends on your objectives, capabilities and budget. Let’s review each of them.
In-House Teams
Developing from scratch requires comprehensive coding, programming, testing and management efforts, which can be lengthy and costly. You need to find and hire experienced developers, iterate on your targets, create mockups and start the development process.
However, these costs can range widely from $100,000 to $350,000 based on the project’s complexity and difficulty.
Source Code Development
This approach utilises clone scripts and pre-written lines of code that can be re-purposed and adjusted to your platform’s functionality. Finding and duplicating a source code can take from one to six months, with expenses ranging from $10,000 to $50,000.
Pre-Built Platforms
Turnkey solutions are pre-development platforms and templates that you can customise according to your business needs. These solutions are developed by professionals who integrate the core functions of an exchange, with flexibility for clients to personalise their services.
You can expect to pay around $30,000 to $50,000, depending on the development models, complexity, customisation freedom and monthly licensing fees. In some cases, these expenses can go up to $100,000.
Crypto Exchange Expenses
The costs of setting up a crypto exchange depend on the method you choose to enter the market, the scale of your business operations, and the difficulty of development. Let’s go through the typical payments.
Beyond initial development, there are other costs to consider when starting an exchange. These recurring expenses are essential to keeping a platform safe, legal, and operational.
Regulatory Compliance
Obtaining licenses and meeting regulatory requirements is costly. In the US, compliance costs exceed $100,000 annually, including state-level registration and fees.
In Europe, the MiCA license fees range from €50,000 to €150,000. In Asia-Pacific regions like Singapore and Hong Kong, licensing expenses typically surpass $50,000.
Moreover, you need to have a legal team to keep up with regulatory updates and ensure you do not violate any laws.
User Acquisition
Marketing and promoting your business is necessary to introduce your platform to the market, which can be costly. This includes content creation and moderation to grow user bases effectively.
You can expect to pay $5,000 to $10,000 monthly on performance marketing through platforms like Google and Facebook, with community-building efforts on Telegram, Discord, and Reddit.
Operating Costs
It is vital to ensure seamless exchange operations through ongoing system updates, hosting, maintenance, troubleshooting and bug-fixing.
You can expect to pay between $3,000 and $15,000 monthly, with additional bandwidth costs for high trading volumes ranging from $2,000 to $8,000. Moreover, cybersecurity measures, including firewalls and encryption protocols, require an annual budget of $20,000 to $50,000.
Miscellaneous Costs
Unexpected expenses are part of doing business. These costs happen due to emergency maintenance costs, legal implications or expenses needed to follow and capture market trends.
Depending on the event and company size, these costs can range from $10,000 to $50,000, while legal violations and lawsuits can cost millions.
Conclusion
Building a crypto exchange platform requires a significant investment. However, the exact amount of money depends on the entry mode, whether through custom-platform development, source code modification, or turnkey solution integration.
Other expenses that you need to consider are regulatory compliance, marketing efforts, operating costs and unexpected payments that may arise due to market and legal activity.
