Frequently Asked Questions
What licences are required to operate a crypto exchange?
Requirements vary by jurisdiction. Common licences: VASP (Virtual Asset Service Provider) registration under FATF guidelines — required in most countries. Specific jurisdictions: FinCEN MSB registration (US), FCA registration (UK), MAS licence (Singapore), VARA licence (Dubai), AISP/PISP under MiCA (EU). Most exchanges launch in a friendly jurisdiction (Dubai, Estonia, Seychelles) and expand licences as revenue justifies compliance cost.
How much does building a crypto exchange cost?
A full-featured spot exchange with matching engine, custodial wallet, KYC/AML, trading UI and API: 8–15 months of engineering time. At a team of 5–8 engineers: $500K–$1.5M in development cost. White-label platforms (AlphaPoint, Openware) are faster and cheaper but less customisable. Licensing and compliance costs are separate and vary significantly by jurisdiction.
What is the Travel Rule for crypto exchanges?
The Travel Rule (FATF Recommendation 16) requires VASPs to share originator and beneficiary information when processing transfers above a threshold ($1,000 in most jurisdictions). This means collecting and transmitting customer information with cryptocurrency transfers, and implementing a Travel Rule protocol (TRP, TRUST, Sygna, Notabene) for VASP-to-VASP transfers. Non-compliance is a regulatory violation. Required in most G20 countries as of 2024.
How long does it take to build a crypto exchange?
A white-label spot exchange can go live in 3–4 months. A fully custom spot exchange with a proprietary matching engine, custodial wallet infrastructure, KYC/AML integration and a professional trading UI typically takes 8–15 months. Perpetual futures or margin exchanges add 3–6 months for the risk engine, funding rate module and auto-deleveraging system. A discovery sprint (2–4 weeks) at the start gives you a reliable milestone plan before full development begins.
What is a matching engine and why does it matter?
The matching engine is the core of a centralised exchange — it receives buy and sell orders and executes trades when prices cross. Performance requirements are extreme: sub-millisecond matching latency, deterministic order priority (price-time), and the ability to handle 10,000–100,000 orders per second during peak volatility. We build matching engines in Go or Rust with in-memory order books and Redis pub/sub for real-time price feed distribution. A slow or buggy matching engine means slippage, user complaints and regulatory scrutiny.
What custody architecture is best for a crypto exchange?
A tiered custody architecture is the industry standard: a hot wallet (5–10% of funds) for instant withdrawal processing, a warm wallet (15–20%) for daily rebalancing, and a cold wallet (70–80%) in air-gapped HSMs or MPC custody for long-term storage. We integrate Fireblocks or Copper for institutional MPC custody, and implement withdrawal limits, multi-sig approval workflows, and anomaly detection. The 2022 FTX collapse and 2023 Binance issues made custody architecture a regulatory priority.
How do you handle KYC and AML for a crypto exchange?
We integrate tier-based KYC: Tier 1 (email + phone, low withdrawal limits), Tier 2 (government ID + liveness check, standard limits), Tier 3 (proof of address + source of funds, institutional limits). KYC providers we integrate: Sumsub, Jumio, Onfido, Veriff. AML screening covers transaction monitoring (Chainalysis, Elliptic), wallet risk scoring, and Suspicious Activity Report (SAR) filing workflows. Ongoing transaction monitoring flags unusual patterns — velocity, dark web wallet interaction, mixing.
What is the difference between spot, margin and futures on an exchange?
Spot trading: buy and sell actual crypto assets at current market price. Settlement is immediate — you own the asset. Margin trading: borrow funds to open positions larger than your balance (2x–10x leverage). You own the underlying asset but risk liquidation if the position moves against you. Futures/perpetuals: contracts that track an asset price without owning it. No expiry (perpetuals), settled in cash, leverage up to 100x on major platforms. Each market type requires different matching engine logic, risk management, and regulatory treatment.
How do you prevent wash trading and market manipulation on a CEX?
Wash trading detection: cross-referencing buy and sell orders from accounts with shared funding sources, IP addresses or device fingerprints. Spoofing detection: flagging large orders placed and cancelled within milliseconds at the same price levels. Our platform includes a surveillance module that generates alerts for compliance review. Market maker agreements include minimum spread and uptime requirements to prevent manipulative quoting. Regulatory requirements (MiCA, SEC rules) increasingly mandate surveillance systems for licensed exchanges.
Do you build white-label crypto exchange platforms?
Yes. We offer two models: a fully custom exchange built from scratch (best for teams with specific technical or regulatory requirements), and a white-label deployment using AlphaPoint, Openware or our own platform (faster time-to-market, lower upfront cost). White-label platforms trade customisation for speed — launch in 3–4 months vs 12–18 months. Both include KYC/AML integration, custodial wallet, admin dashboard and compliance reporting. We recommend white-label for market validation and custom builds for scale.
