Saturday, January 28, 2023

Cryptocurrencies May Disrupt Broking Industry, Says Zerodha Co-Founder

The co-founder of Zerodha Broking Nithin Kamath, who once disrupted the Indian broking industry with the discounted fee model, believes that cryptocurrencies could again bring disruption into the market.  

On Thursday, a series of tweets were released by Kamath stating that this time the broking industry may experience disruption from cryptos. He further mentioned, “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.”

Zerodha introduced the broking industry to the discount broking model. Today, this model is being followed by many traditional brokers and new-age firms. The company also explained how technologies could play an important role in the broking business. 

However, the traders are always eager to earn more profit, therefore, any instrument which could benefit them in the future suddenly becomes a successful thing in the market.

While explaining it, Kamath 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.”

Recently, the brokerages and exchanges in the US experienced disruption, according to the co-founder of Zerodha, it happened due to crypto. 

While demonstrating his statement, Kamath said that the AUM of Coinbase is $180 billion and the crypto AUM of Robinhood Crypto is $115 billion. Many incumbents were not able to react to this quickly because of the regulatory clash and others missed it.

Till date, India has an uncertain stance over cryptocurrency. The government is planning to regulate it and has prepared a bill also, which has been sent for the cabinet’s approval.

Kamath believes that India might replicate the US model over cryptocurrency. 

He mentioned, “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.”

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