  We introduce the $C^*$-algebra $C^*(\kappa)$ generated by the Koopman
representation $\kappa$ of an \'etale groupoid $G$ acting on a measure space
$(X,\mu)$. We prove that for a level transitive self-similar action $(G,E)$
with $E$ finite and $|uE^1|$ constant, there is an invariant measure $\nu$ on
$X=E^\infty$ and that $C^*(\kappa)$ is residually finite-dimensional with a
normalized self-similar trace. We also discus $p$-fold similarities of Hilbert
spaces in connection to representations of the graph algebra $C^*(E)$ and
self-similar representations of $G$ in connection to the Cuntz-Pimsner algebra
$C^*(G,E)$.
