India's economy and job market appear to be feeling the effects of recent action and historical inaction. Bold actions such as demonetisation and GST were always bound to have a short term impact on the economy. However, historical negligence towards health of the banking system and quality of the workforce in the country are resulting in adverse credit conditions and an ‘unemployable’ workforce that is beginning to bear down on the economy. On top of this, there could be a global recession that will have a contagion effect, so the government really has its task cut out this term.

To its credit the government has been making the right statements to address the economy —

encouragement to entrepreneurship, heavy investment into infrastructure, digitalising India, and improving business conditions for foreign institutions. These changes are structural and will therefore take time.

One space that the government has been overlooking (rather considering a ban!) has the potential to tick all the right boxes and propel the economy towards the much-publicised $5-trillion mark — digital assets.

Opportunity loss to government

Digital assets are much more than just bitcoin and its price. The impact of encouraging and regulating digital assets can be felt across the entire economy.

a) Tax revenues: Significant tax revenues can be generated from exchanges, traders, and start-ups that will flourish in this space. Just within the financial system, the outside world has progressed into derivatives, lending, custody and asset management of digital assets, and we are yet to address the basic spot market.

b) Entrepreneurship: The ICO and STO markets can provide alternative sources of funding to many start-ups, reducing their dependency on the VCs and banks. This could be a tremendous boost to entrepreneurship in the country. For perspective, blockchain start-ups raised $6 billion in ICOs as compared to under $2 billion from VCs, in Q1 2018. Preventing this access is directly putting the country's entrepreneurs at a distinct disadvantage against their global peers.

c) Job creation: Regulating this space and developing a robust start-up ecosystem around it will create product-based companies out of India and tens of thousands of skilled jobs — developers, IT, accountants, legal, risk management and educational platforms. Delays here will result in another wave of brain drain and the skilled workforce will contribute to other countries' GDP.

d) Increase in GDP: All the above factors will eventually result in higher value creation through increased goods and services produced by the country, whose monetary value will enhance the GDP.

Our analysis predicts that digital assets ecosystem could be at least a Rs 15,000 crore opportunity for the government, even before considering the knock-on effects into the traditional industries.

While the Supreme Court keeps debating the pros and cons of the banking ban, the bigger picture in all of this is being completely missed. This is a once in a lifetime opportunity for the government to use a nascent technology towards building a more prosperous economy, and one that clearly checks all the boxes towards such an economy.

This government is clearly not afraid of taking bold decisions, and I am hopeful that they will see through the noise and acknowledge the power of digital assets and embrace them. As part of the private sector we will be more than happy to assist them in this journey.

Prashanth Swaminathan is an alumnus from IIT Guwahati and IIM Calcutta, who spent 10 years in investment banking at Morgan Stanley London before setting up an EU cryptocurrency exchange, XDAT.

First Published:Aug 23, 2019 6:00 AM IST