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Cryptocurrency adoption has grown significantly over the past decade. Platforms like Bitwala, and Bitrefill allow users to spend crypto in routine life. However, crypto spending is only possible with secure hot wallets that allow users to keep digital assets without worrying about scams, hacking, or theft.
Thanks to advancements in technology, building crypto exchanges and offering secure wallets are easier than ever. Not only startups but also existing businesses can build functional crypto exchanges with hot wallets in under six weeks.
This blog will elaborate on how businesses can build and launch crypto exchanges with wallets. But, first, let’s clarify hot wallets and how they differ from cold ones.
Hot vs cold wallets
A hot wallet is a software-based wallet, while a cold wallet is a hardware device. Hot wallets are protected with private keys that are stored on devices connected to the internet. In contrast, cold wallets keep private keys completely offline, offering enhanced security against hacking attempts.
Users can access hot wallets from devices connected to the internet such as mobiles, laptops, tablets, and desktop computers. On the other hand, cold storage wallets include hardware devices, USB sticks, and even paper wallets.
The cost structure also differs: hot wallets typically have a monthly subscription or transaction fee whereas cold wallets range in price from 40 euros to 400 euros, depending on brand and device.
Build a crypto trading app with hot wallets
There are two ways to build and launch a crypto trading app. One, code the entire platform from scratch. This can take a year or more before the crypto trading app is ready to launch.
Another way is to partner with crypto service providers such as Striga that can help launch a crypto exchange in under six weeks. Striga helps businesses offer end users secure hot wallets. Easy-to-embed APIs make the whole process easy to navigate.
Before making any commitment, innovators can test the product in a sandbox environment. Companies can explore features and see how the final product would function for the end users. Sandbox testing provides flexibility, reducing risks and ensuring businesses choose the best available option.
Additionally, crypto service providers offer open documentation for the developers, helping them fully understand the integration process and optimize the exchange platform effectively.
KYC and AML compliance: A major challenge
Implementing KYC and AML checks is one of the biggest challenges when building a crypto trading app. Companies have two options. The first is to handle everything in-house, which may require getting a VASP license, depending on the country.
In the EU, businesses must also follow MiCA regulations and comply with GDPR when handling user data. Without meeting these legal requirements, companies may not be allowed to process user data or offer crypto services.
The second option is to partner with crypto service providers. With the help of licensed crypto service partners, companies can focus on user experience and business expansion, while the service providers manage KYC and AML compliance.
Many service providers already hold VASP licenses and comply with MiCA regulations, allowing them to handle these regulatory requirements on behalf of businesses.
Striga uses SumSub to onboard end users. The in-house compliance team at Striga ensures that every user and business onboard has a clear background. Striga offers a two-tiered KYC process:
- Tier 1: The new user goes through basic checks, including name, phone number, email, and liveness verification. Once the user reaches the inbound limit for Tier 1, they are automatically prompted to complete Tier 2.
- Tier 2: This includes more detailed checks, such as verifying the user’s source of income, residence proof, and other necessary documents. Users can also voluntarily opt for Tier 2 once approved on Tier 1.
Choose the best hot wallet provider for cryptocurrency platforms
Choosing the right hot wallet provider is an important decision that impacts the security, performance, and growth of cryptocurrency platforms. By focusing on factors like security, scalability, compliance, and ease of integration, businesses can make a smart choice that benefits end users and sets apart the cryptocurrency platforms from competitors.
Whether companies decide to build a wallet system or partner with a trusted provider like Striga, ensuring the hot wallet is secure, reliable, and user-friendly will set the foundation for a successful crypto platform.
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