Why Zerodha’s Nithin Kamath Worries Crypto Will Disrupt Online Stock Brokers

Co-founder of online brokerage firm Zerodha, Nithin Kamath, said today that the industry should be wary of being disrupted by cryptocurrency and any other stock brokerage startups, although it or “still small in India”.

In a series of tweets, billionaire Kamath explained why he fears it, especially for new-age online brokers or even exchanges. He said that in brokerage or exchange business, both price and product, there is not much left to disrupt. “Unless of course someone finds a way to pay people for trading (-ve brokerage is not allowed by regulation) or finds a way to help all customers make money” , did he declare.

Brokers and exchanges depend on a small group of active traders, around 1 million traders for revenue. If they start trading something else, it will disrupt everything, he said, adding that active traders also provide liquidity, reduce cost and impact risk, and contribute to better price discovery.

Explaining further, he said traders want high leverage, volatility and open markets longer. The type of crypto scores shares on these. “Of course, crypto trading is much more risky and there is no fundamental information about price movements. But greed usually gets the better of most people over time.”

Kamath also pointed out that crypto is what has been disrupting brokers and exchanges in the United States recently. Coinbase’s AUM is $180 billion and Robinhood Crypto’s crypto AUM is around $11.5 billion, he said. “Many incumbents were unable to react quickly, fearing regulatory backlash and mostly missed the bus,” he added.

However, Kamath said, “Although Crypto is still small in India, we are in a similar situation to the US a few years ago. Regulatory fear does not allow regulated platforms to offer Crypto. Eventually, if the regulatory status quo continues, traders may walk away and disrupt the brokerage industry.”

Nithin Kamath and Nikhil Kamath are India’s richest self-made billionaires under 40, according to IIFL Wealth and Hurun India’s 40 and Under Self-Made Rich List 2020. Nithin and Nikhil Kamath are the richest entrepreneurs under 40 years in India with a wealth of 24,000 crores.

Meanwhile, within 15 months of commencing operations in India, CoinSwitch Kuber claims to have become the largest cryptocurrency exchange in the country by the total number of users registered on the platform. It reached 10 million registered users this week.

“CoinSwitch Kuber has reached the milestone in just 15 months since commencing operations in India in June 2020, a testament to the simplicity and convenience the platform offers its users,” the company said in its statement. official.

Out of the total 10 million users, 7 million are active users on the platform with a monthly trading volume of Rs15,138 crore, according to the company.

The platform sees maximum participation from the millennial and GenZ population. About 75% of its total users are between 18 and 35 years old, while the average age is 24. It claims to attract investors from over 4,000 cities across the country, with nearly 55% of users belonging to Tier 2 and 3 cities.

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Dolores W. Simon