In a series of tweets, Zerodha's co-founder Nithin Kamath explains why he fears cryptocurrency is potentially disruptive especially for the new-age online brokers and even exchanges.
The co-founder of India's largest online broking firm Zerodha, Nithin Kamath, in series of tweets said that cryptocurrency has the potential to disrupt "new-age online brokers and even exchanges".
He said, "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."
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 (😬very tough) 2/6
Kamath explained that brokers and exchanges depend on a small group of active traders for revenue. "If they start trading something else, that will disrupt everything," said the Zerodha co-founder while adding that "active traders provide liquidity, reduce impact cost and risk, and help better price discovery".
In a Twitter thread Kamath said that while cryptocurrency is "still small in India", it can "disrupt the broking industry" just like it did in the United States. "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 ~$11.5bn. Many incumbents couldn't react quickly, fearing regulatory lash back and mostly missed the bus," said Kamath.
He added, "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."
Crypto is what has recently disrupted brokers & exchanges in the US. The AUM of Coinbase is $180 billion, and the crypto AUM of Robinhood Crypto is ~$11.5bil. Many incumbents couldn't react quickly, fearing regulatory lash back and mostly missed the bus. 5/6
Recently, Kamath had announced that Zerodha Broking received the in-principle approval from the Securities and Exchange Board of India to set up an asset management company (AMC). In a tweet, he said, "So, we just got our in-principle approval for our AMC (mutual fund) license. I guess now comes the hard part."
In just a decade of its launch, Zerodha has become the country's largest brokerage firm by the measure of its user base. According to the company, Zerodha handles four million trades a day on the exchanges.
Meanwhile, Zerodha founders — Nithin Kamath and Nikhil Kamath — have been ranked as the richest self-made under 40 billionaires in India in the IIFL Wealth and Hurun India’s 40 and Self-Made Rich List 2020. Their wealth is estimated at Rs 24,000 crore.