Key Crypto Exchanges Challenges and How to Solve Them

Establishing and growing a successful exchange involves numerous crypto exchange challenges. Several challenges, like regulatory complexity, security concerns, liquidity issues, scalability, fiat integrations, and trust competition, are dissuading many entities from launching their crypto exchange business. Innovation is no longer the only major ingredient for a successful exchange; the exchange must be comprehensive, scalable, compliant, and technologically stable to solve some of the challenges it may encounter.

In this article, we will explore the key challenges with setting up crypto exchange operators. It will also provide insights for navigating these challenges and, most importantly, highlight how WL Global Solutions’ white label product can solve these challenges.

By leveraging our robust platform at WL Global, you can be confident that a long-term crypto exchange project can be transformed into a quick, secure, comprehensive, and ready-to-launch exchange.

Regulatory Complexity and Legal Ambiguity

Regulatory complexity is one of the most significant global barriers to entry in the crypto exchange industry. Establishing and running a crypto exchange involves navigating a complex and strict regulatory system of legal ambiguity. Apart from the widely known stringent Anti-Money Laundering (AML) and Know Your Customer (KYC) laws, there are also some required region-specific licenses across many countries. Navigating this can be very challenging, as a single compliance default can result in penalties, operational delays, and even reputational damage.

At WL Global, we pride ourselves on delivering an out-of-the-box, deployment-ready, world-standard solution. Our white label platform is equipped with built-in and customizable KYC and AML modules that streamline the user onboarding process and meet legal requirements.In addition, state-of-the-art tools like Scorechain and CrystalBlockchain are integrated into Know Your Transaction (KYT).

These tools are reliable for real-time blockchain analytics monitoring transaction flows to flag suspicious activities. This enables your team to identify risks and eliminate them from the path of compliance. This prevents them from ever reach the point of being a compliance issue. This forward-thinking solution enables you to demonstrate your ability to satisfy regulatory demands and establish regulator trust.

Security, Compliance, and Consumer Protection

Security is a fundamental component of every exchange platform; it is of utmost importance. The crypto ecosystem is a low-trust community, and the history of the industry is characterized by many high-profile hacks and data breaches, which have depleted customers’ trust over time. A successful exchange must be secure enough to protect user funds and sensitive data from the numerous possible kinds of security threats.

WL Global provides a security-first solution that prioritizes security in the platform’s design. A white label solution offers a multi-layered security architecture that includes:

• Advanced Encryption: All sensitive data, especially user information and transaction data, is securely encrypted with the latest encryption technology.
• Multi-factor Authentication: Multi-factor authentication is activated and applied to all users to prevent unauthorized access.
• Cold and Hot Wallet Strategy: The platform has a hybrid approach to wallet storage. Most of the funds are stored offline in cold wallets, and a small portion is stored online in wallets for working capital liquidity for day-to-day operations. It minimizes the risks of attacks.
• Integrated Custody Options: The platform provides you with the ability to choose from your own tailored custodianship solution or integrate with other top industry custodians like Fireblocks and BitGo. This keeps your business first and lets you decide how you would want to secure your business model.
  

With our white label solution, your business is positioned behind a robust security structure that will make you proud of your user protection and trusted brand.

Liquidity and Market Depth

Liquidity remains the blood of each crypto exchange. Lack of liquidity and market depth, and traders will suffer from wide spreads, high slippage on big trades, and other disappointing trading experiences. Liquidity deficits will often drive users away to exchanges where trades can be completed effectively at a fair price.

WL Global Solutions remedies this liquidity problem by introducing users to institutional-grade liquidity on day one of operation. Our solution is equipped with 17 ready-to-use crypto exchange connectors to provide your exchange with the opportunity to aggregate liquidity from established exchanges. We also provide effective market-making algorithms for automatic filling of order books.

This ensures a tight spread and enables a smooth trading environment. Additionally, liquidity providers can be linked to facilitate the creation of synthetic crypto instruments that could be used to diversify trading pairs and acquire a greater user base.

Infrastructure, Scalability, and Downtime

Many exchanges are plagued with inadequate infrastructure for high-volume trading. Periods of high market activity can lead to downtime and a poor trading experience if the infrastructure is weak. Building a high-performance and scalable crypto exchange infrastructure requires huge capital and time commitment.

WL Global Solution provides a high-performance infrastructure designed for high-volume market activities. The technologicall infrastructure of our platform supports a high volume of trades and user traffic with minimal latency. This minimizes the possibility of system downtime during peak usage and builds user trust. This infrastructure can also support any crypto or fiat instrument, securing your business’ scalability. Interestingly, our solution can be deployed for your business in as little as two weeks.

Fiat Integration & Banking Relationships

Fiat is very important to many crypto users. The seamless deposit and withdrawal of funds in traditional currencies encourages massive adoption of crypto. However, achieving this requires building relationships with traditional banks and integrating with multiple payment providers. It is a very hassling and lengthy process because, on one hand, traditional banks are often reluctant to partner with crypto-native businesses, and on the other hand, each payment system integration can be complex and very time-consuming.

We solve this problem by providing your business access to 60+ payment systems out of the box. This also includes global and regional options for credit cards, bank transfers, and digital wallets.

With this pre-built system, your crypto exchange can offer its users a massive selection of simple deposit and withdrawal options from launch. We also offer customizable integrations on request for specific or niche payment providers. This means your exchange can be in a position to cover the needs of various categories of users.

Competitive Differentiation and Trust Building

To develop a successful crypto exchange with a differentiated strategy towards the market, your business requires a high brand identity and a high value proposition. Many users are often wary of new platforms, and since the market is saturated with many platforms, they tend to be attracted to already established platforms. The strong brand identity and value proposition you establish for your platform will attract new users.

WL Global empowers you to build a credible brand with a unique brand identity. Our exchange solution is fully customizable, and you can have the freedom and authority to put in your branding, logos, and colors. Above all, the quality and features of the solutions offered ensure that your exchange is positioned as legitimate and reliable. It also ensures that users who are onboarded have a smooth trading experience and are retained as loyal users.

Conclusion

Launching a successful crypto exchange is plagued with many challenges. From overcoming regulatory complexities, maintaining robust security systems, ensuring constant and sufficient liquidity, and building a scalable infrastructure with a differentiated product, the challenges may seem quite daunting. However, a shortcut magic trick to eliminating these constraints is to procure an effective white label solution.

WL Global’s white label platform is a result of years of industry experience, expertise, and research and development. The solutions are carefully designed, taking into consideration critical issues that are shared with crypto exchanges. This produces an innovative product that is secure, compliant, liquid, and scalable.
Are you prepared to resolve all the issues your business is facing in developing a crypto exchange platform? Does your business want to develop and launch a world-class crypto exchange?

FAQ's

Q1: How does WL Global’s white label platform help with regulatory compliance?
Our solution has inbuilt KYC/AML modules. It also comes bundled with highly rated KYR tools like Scorechain and CrystalBlockchain. It allows real-time monitoring of transactions and an integrated mechanism for international standards-based compliance.

Our solution is equipped with embedded KYC/AML modules and is pre-packaged with highly rated KYR utilities like Scorechain and CrystalBlockchain. It allows real-time monitoring of transactions and an integrated mechanism for international standards-based compliance.

Q2: Can it ensure security and custodial safety?
Yes. Our solution has multilayer encryption, a cold wallet and hot wallet security model, and custodian flexibility to allow you to choose your own bespoke custody solution or connect to qualified providers.

Q3: Is deployment fast and scalable?
Yes. Our setup also has the ability to support high performance and high volumes of trades for your needs in scalability.