Cryptocurrency may disrupt online stock brokers, says Zerodha’s Nithin Kamath  |  Photo Credit: BCCL
New Delhi: Online broking firm Zerodha co-founder Nithin Kamath said that the nascent, currently evolving cryptocurrency scene in India has the potential to disrupt new-age online brokers and even traditional exchanges.
In a series of tweets, billionaire Kamath explained why he fears so, especially for the new-age online brokers or even exchanges. He said that in broking or exchange business, both on pricing and product, there is not much left to disrupt. “Unless of course, someone figures a way to pay people money for trading (-ve brokerage not allowed by regulation) or figures a way to help all customers make money,” he said.
In India, the fate of cryptocurrency is still uncertain. The government has yet to decide on its legality, let alone widespread usage or regulations. However, Kamath says what happened in the US could be replicated in India.
Crypto overscores stocks when it comes to high leverage, volatility, and longer market durations, despite the high risk and lack of fundamental information involved. The revolution is quietly underway in the US, with testimonies to this disruption being the AUM (Assets Under Management) of Coinbase, which stands at 180 billion dollars, and the crypto AUM of Robinhood Crypto, which is currently at around 11.5 billion dollars.
“While Crypto is still small in India, we’re in a similar situation as the US, a few years back. The regulatory fear doesn’t allow regulated platforms to offer Crypto. Eventually, if the status quo on regulations continues, traders can move away & disrupt the broking industry”, he tweeted.
He said there is not much left to ‘disrupt’ in the broking or exchange business. “Disruption from the inside can happen only if someone figures out a way to pay people money for trading, which is not allowed by regulation, or someone figures out a way to help all customers make money, which is very tough.”
Zerodha pioneered the discount broking model, a fixed price for every trade. This has now been followed by almost every traditional broker, along with some new-age firms. The company also brought the role of technology in broking business into prominence.
But traders always want more. And, any change that will deliver them that may become successful.
“Traders want high leverage, volatility and markets to be open longer. Crypto kind of scores over stocks on these. Of course, trading crypto is a lot riskier and there is no fundamental information for price movements. But greed usually gets the better of most people with time,” said Kamath.
Nithin Kamath and Nikhil Kamath are the richest self-made billionaires in India under 40, according to IIFL Wealth and Hurun India’s 40 and Under Self-Made Rich List 2020. Nithin and Nikhil Kamath are the wealthiest entrepreneurs under the age of 40 in India with a wealth of Rs 24,000 crore.
Meanwhile, within 15 months of commencing operations in India, CoinSwitch Kuber claims to have become the country’s largest cryptocurrency exchange in terms of total number of registered users on the platform. It hit 10 million registered users mark this week.
“CoinSwitch Kuber has reached the milestone in just 15 months since starting operations in India in June 2020, a testament to the simplicity and convenience the platform provides its users,” the company said in its official statement.