Outlook Business Desk
Zerodha CEO Nithin Kamath cautions that crypto derivative exchanges function in a regulatory grey zone, leaving investors highly exposed due to unclear rules and limited oversight globally.
Kamath described crypto derivative exchanges as being in a limbo, “neither fully regulated nor unregulated,” highlighting that this ambiguity can be exploited dangerously, putting investors’ money at risk.
Crypto derivative exchanges lack investor safeguards, he said, noting that unlike stock markets, no authority like the Securities and Exchange Board of India (SEBI) can step in if funds are lost, withheld or misused.
Kamath highlighted that in crypto derivatives, traders may not know their counterparty, and sometimes the platform itself acts as the other side, leading to a clear conflict of interest.
Kamath warns that when the platform acts as the counterparty, its incentives are misaligned, profiting when customers lose, similar to dabba trading or contracts-for-difference (CFD) arrangements.
Some crypto derivative platforms offer 100–200 times leverage, he added, and combined with crypto’s volatility, even minor price movements can wipe out investor funds almost instantly, making trading extremely risky.
Regulators worldwide flag crypto’s risks to financial stability. Despite surging prices earlier this year, crypto derivatives remain dangerous, reinforcing Kamath’s caution for traders on unregulated platforms.