Nithin Kamath | Crypto: Crypto could be the biggest threat to brokers and exchanges, says Nithin Kamath

Synopsis

“I don’t think it will be another stock brokerage firm or a new stock exchange (which will disrupt the broking industry). It will most likely be an outsider, maybe crypto,” Kamath said in a series of tweets on Thursday.

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NEW DELHI: Though is may sound far-fetched, Zerodha boss Nithin Kamath — who disrupted the Indian broking industry with a discounted fee model — thinks the next disruption will likely come from an entirely different segment, and that could be cryptocurrency.

“I don’t think it will be another stock brokerage firm or a new stock exchange (which will disrupt the broking industry). It will most likely be an outsider, maybe crypto,” Kamath said in a series of tweets on Thursday.

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.”

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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.

In his view, crypto is what has recently disrupted brokerages and exchanges in the US. The AUM of Coinbase is $180 billion, and the crypto AUM of Robinhood Crypto is $11.5 billion. Many incumbents couldn’t react quickly, fearing regulatory lashback and mostly missed the bus, 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.

“While the crypto industry 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,” he said.

Source

Updated: 09/09/2021 — 13:00

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