Legalization Will Make Big Banks Pay Up for Weed
Even in legal states, weed companies are cash-only.
The lack of access to traditional financial services within the big banking system continues to be one of the most problematic issues for the booming marijuana industry. And because weed is not federally legal, most all cannabis business, even that of major companies that comply with state laws, is done in hard cash.
If you ask anyone in a legal state about growing a weed business with only cash, they'd probably say that they'd prefer, for safety and tax reasons, to just have access to bank perks. Over 600 dispensaries have been robbed in New York alone, just in the last three years, says Reuters.
To date, 301 mainstream banks are reportedly getting their feet wet in the weed world, though U.S. Treasury guidelines were laid out in 2014 for banks hoping to work with weed businesses in states with marijuana laws.
But in order to get the ball rolling on the weed-banking reform, voters will have to push for federal cannabis laws, which after this election, might not be so far behind. The state-legal booms in the industry would force banks to reevaluate how they can fund weed, especially if they want some control of that cash flow. California's Proposition 64, which would legalize the largest marijuana market in the country if passed, could be one of the benchmarks of normalization that accelerates banking reform.
"If just California voted yes, and its 39 million residents suddenly found themselves able to purchase marijuana freely, the size of the industry could triple, to $18 billion, forcing regulators and banks to reevaluate their institutional trepidation."
So how does a growing industry move forward? What are financial service providers to do?
Credit unions are one option. Though a federal judge reportedly said in January, that the involvement of Fourth Corner Credit Union––a Colorado-based provider of services––with weed industry businesses, would “facilitate criminal activity.”
Other factions of the legal marijuana market seek an answer to their bud-money prayers in payment systems that utilize blockchain technology.
Lamine Zarrad, CEO of Tokken, told KINDLAND previously of the tech, which is growing in popularity inside the weed world and among mainstream businesses: “Once information enters the blockchain ledger, it is virtually impossible to edit, or distort.” Tokken’s transaction-enabling system involves the banks in the process. Though unrelated to anything having to do with cannabis, even Visa is reportedly exploring a transaction-enabling product which utilizes blockchain.
Image via VSCO
In Ohio, which passed House Bill 523 in 2016, and set the framework (at least on paper, and sans Nick Lachey) for legal medical marijuana in the Buckeye State, a Republican senator proposed a closed-loop payment system. The model would have all industry transactions, including business-to-business operations, and patient-dispensary purchases taking place via state-controlled accounts held by marijuana providers, consumers, and producers.
In the age of digital money, legal weed stores, delivery services receiving millions of dollars in venture capital, alcohol distributors becoming legal pot pushers, and mobile apps that turn dispensaries into mobile ATMS––if banking is still an issue for the cannabis industry, is it also then still the weed world’s biggest problem, or is monetary legislation simply behind the times?