Why Zerodha's Nithin Kamath fears crypto may disrupt online stock brokers
Online broking firm Zerodha co-founder Nithin Kamath today said that the sector should be wary of getting disrupted by cryptocurrency and not any other stock brokerage startup, albeit it is ‘still small in India.’
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.
Brokers and exchanges depend on a small group of active traders, approximately 1million traders for revenue. If they start trading something else, that will disrupt everything, he said, adding that active traders also provide liquidity, reduce impact cost and risk, and help better price discovery.
Explaining further, he said 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."
Kamath also pointed out that crypto is what has recently disrupted brokers and exchanges in the US. The AUM of Coinbase is $180 billion, and the crypto AUM of Robinhood Crypto is approximately $11.5 billion, he said. “Many incumbents couldn't react quickly, fearing regulatory lash back and mostly missed the bus," he added.
However, Kamath said, “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 and disrupt the broking industry."
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 ₹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.
Out of the total 10 million users, 7 million are active users on the platform with a monthly transaction volume of Rs15,138 crore, as per the company.
The platform is witnessing maximum participation from the millennial and GenZ population. About 75% of its total users åre aged between 18 and 35, while the average age is 24. It claims to attract investors from over 4,000 cities across the country, with nearly 55% users belonging to tier 2 and 3 cities.