Can India’s Cryptoeconomy Help In Closing SME Financing Gap

Owing to it to COVID-19, India’s economy has fallen on hard times. The lack of regulatory clarity in terms of cryptocurrency trading, holding, and business operation, for instance, have been tough for the people in the region.

The government of the country is reportedly clinging to the goal of becoming a $5 trillion economy by the year 2024-25 and had previously highlighted that the infrastructure sector and other initiatives in Budget 2021-22 were aimed at achieving the objective. However, in order for that to happen, India needs to close a huge financing gap for its small and medium-size enterprises [SMEs].

One such way to do this is to tap into the cryptocurrency market. According to Indian Software Products Industry Round Table [iSPIRT], which happens to be a ‘think tank’ for the country’s software products realm, India has key assets which will facilitate attracting global capital.

India’s Unique Opportunity To Close SME Financing Gap By Attracting New Class Investors

For instance, the country’s youth population, the growing energy of its tech industry, the swelling internet connectivity, as well as the increasing acceptance of “informational collateral” that has mostly replaced the traditional physical collateral.

However, one thing that the country’s leaders have failed to do is to integrate these assets into the new multi-trillion-dollar crypto economy, asserted in the latest report by the think tank. iSPIRT went on to speculate that the cryptocurrency market could potentially be a “risk-tolerant, internationally oriented, growth-seeking pool of investors in the world” that has remained unexplored by the country.

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Can India’s Cryptoeconomy Help In Closing SME Financing Gap 1

iSPIRT acknowledged that the new class of “wealthy, globally-minded crypto investors” could, in fact, leverage “informational collateral” to pour in capital into potentially high-risk businesses that are way outside of the tried and tested venues of America, Europe, East Asia, and the large enterprises in the country. It also stated,

“India could offer a viable path to deploy this new crypto wealth in a controlled manner while solving for SME financial inclusion. Inflows of crypto from KYC-ed investors via approved Indian, global exchanges can potentially be allowed into India for the purposes of enhancing SME access to low-cost global capital.”

Photo by Ewan Kennedy on Unsplash

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