Banking in the Cannabis Industry
As of the publishing of this blog, cannabis has been legalized medically in over 37 states and recreationally in 18, however; it still remains illegal at the federal level. (That’s okay, though! We’ll get there.) Banking services are practically absent to cannabis companies as financial institutions are wary because it’s still prohibited to sell or distribute federally. Credit card companies share the same wariness because of the potentiality of lawsuits. Additional liability within an industry that operates so much in the gray, it’s challenging to calculate the risk.
On March 23, 2021; congress introduced a bill entitled: the Secure and Fair Enforcement Banking Act of 2021 (SAFE Banking Act) and this bill would prohibit the discrimination of legitamite cannabis companies by financial institutions and protect FI’s against penalities for doing business with them. To quote:
“Additionally, proceeds from a transaction involving activities of a legitimate cannabis-related business are not considered proceeds from unlawful activity. Proceeds from unlawful activity are subject to anti-money laundering laws. Furthermore, a depository institution is not, under federal law, liable or subject to asset forfeiture for providing a loan or other financial services to a legitimate cannabis-related business.” (S.910 – SAFE Banking Act of 2021) This bill also prohibits the closing of consumer-based accounts for reputable liability; if an account must be closed, it must be a threat to our national security, involved in domestic/international terrorism funding, or be a sponser of a known terrorist organization.
It all sounds pretty rad, right? While the bill has been introduced to Congress, it has yet to be passed by the Senate. As our government officials continue to debate/weigh in on the possibilities, the cannabis industry continues to suffer in the legislation’s absence. Most cannabis companies operate on a cash-only basis; this operational flow comes with its own set of complications, too. Robberies and a mistaken case of fund allocation have caused many people to lose capital and have to crawl through mazes in order to get their money back – money that was obtained legally. Without the protections that financial institutions offer – as well as the accessibility of credit card companies to the consumer – it’s been challenging for many cannabis companies to thrive. A plausible alternative to cash operations is digital currency – cryptocurrency, to be exact! Cryptocurrency is a digital currency that is encrypted by cryptography; cryptography is a highly encrypted form of communication that only allows for the sender and recipient to view it.
Cryptocurrency and the Cannabis Industry
The complications that arise for businesses without access to banking can make or break them. As companies continue to adapt and find alternatives, cryptocurrency has made its way to the forefront as a possible contender. Cryptocurrency, in and of itself, is a medium of trade. (We’ve all heard of Bitcoin, right? It was the first cryptocurrency ever created!) It utilizes blockchain technology in order to facilitate the movement of tokens (monetary units) and transaction verification. Blockchain technology is an encrypted technology that allows for cryptocurrency to exist; it keeps track of each transaction in a digital landscape. This landscape is readily accessible to the public and isn’t governed by federal regulation. This dichotomy enables cannabis companies to accept alternate forms of payment, reduces fees and premiums, and allows for international transactions. Cannabis companies also have strict guidelines they must follow and transparency is pivotal. The digital landscape that encompasses both cryptocurrency and blockchain technology is secure; it makes accessibility and trackability visible to the company. This information can’t be changed, only added to.
Benefits and Challenges of Cryptocurrency
In the United States, cannabis has evolved into a multibillion dollar industry. While this growth superseded expectation and is incredible on its own, it’s baffling to consider how challenged the industry is by the discrimination its facing from banking and other financial serivces. Many financial institutions refrain out of fear that doing business with a cannabis company will result in money laundering charges; cannabis is still listed as a controlled substance federally. Even though cryptocurrency enables the business to accept alternate forms of payment and reduces the fees and premiums associated with working with banks; it isn’t without its own set of challenges, too. Cryptocurrency’s value is contingent upon its user base – meaning that it has to have a steady, consistent clientele utilizing it in order for it to retain its value. Take Bitcoin, for example: it’s the most well renowned and most utilized form of crypto. Its value has fluctuated across the time of its inception. Without that demand from its consumer, cryptocurrencies struggle to have relevancy, and therefore limit the cannabis’ market of its use. There are cryptocurrencies that are specific to cannabis, but they face the same fluctuations in value.
Bitcanna is a cannabis-specific form of blockchain cryptocurrency. In addition to providing digital monetary units for businesses and consumers alike, Bitcanna keeps a record of the entire supply chain process; this includes: product placement and flow, supply and handlers, as well as production. Data is submitted automatically into Bitcanna’s blockchain technology and is readily accessible and unchangeable. “The industry is ready to take the lead and show just the thing that sets them apart from the competition, which is the quality and origins of their products and their processes. Proving their legitimacy like any else. Doing so will leave no room for a shady image.” (Bitcanna.io)
Bitcanna encrypts and secures its users’ data and keeps a solidified record of all business transactions. Bitcanna offers accessibility between consumer and business. On its platform exists a consumer-centric survey that enables you, the consumer, to speak on your experiences while utilizing the platform. It also offers a way for you to track your purchases back to their initial source; this transparency is vital to establishing trust- something Bitcanna prides itself on.
PotCoin is a type of cryptocurrency that operates on the digital landscape: PotCoin Network Ecosystem Solutions. Similar to BitCoin, PotCoin allows the consumer accessibility to control their funds without the use of a bank, transferability without an intermediary, and it’s encrypted so it’s secure. The only things you’ll need to utilize PotCoin is an internet connection and a digital wallet. PotCoin specialties in Seed-to-Sell scaling; this references the ability to manage your supply chain structure in real time. “Track and certify the origin of your supply, automate boring compliance tasks, and allow for open-source and transparent real-time auditing directly on-chain.” (potcoin.com)
The Future of Crypto in the Cannabis Industry
As legislation continues to evolve, safe and secured banking for the cannabis industry will come to pass, but the timeframe is shrouded by uncertainty. Cryptocurrency can expand customer potential and provide new possibilities as a cash alternative. As our age migrates further into the digital realm, the accessibility and demand for cryptocurrency will increase – as will the public’s demand for accessibility of payment. The use of blockchain technology, which functions much like an accountant’s ledger, provides businesses with the trackability of their purchases, mitigating between supply chain tasks, and satiate regulatory requirements.
One of the biggest challenges that cash-only businesses must face are robberies – several cannabis companies have been subjected to this, some violently. It’s created a public safety issue. Cannabis advocates and lawmakers fought diligently to shed light on these concerns to congress – and their efforts are finally paying off! In March of 2021, an act of legislation was introduced called The Secure and Fair Enforcement Banking Act (SAFE Banking Act). This act is designed to allow cannabis businesses the ability to fully utilize banking services; it also provides protection to both the business and the bank, cutting out the potential for discrimination and penalties. While it’s amazing that this legislation even made it to the floor, it has yet to be passed by congress. As we continue to wait on legislative measures, cannabis advocates continue to pressure to ensure this industry has a fair chance to thrive.