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Although medical and recreational marijuana is legal in many states<\/strong> across the country, cannabis remains illegal under federal law\u00a0<\/strong>and the lack of federal regulation forces the industry to operate outside the traditional financial system<\/strong>.<\/p>\n Dispensaries and other cannabis companies without access to\u00a0federal banks and credit card\u00a0networks\u00a0are forced to accept and maintain cash on hand, creating a dangerous situation for workers.<\/p>\n This untenable situation<\/a><\/strong> has resulted in more than 80 armed robberies in Washington state alone<\/a><\/strong>, some of which ended in death.<\/p>\n Cannabis entrepreneurs are also\u00a0forced to pay exorbitant bank fees<\/a> that must be paid at state-licensed institutions.<\/p>\n Cryptocurrency <\/strong>has long been touted as the solution to the US cannabis industry’s banking problems<\/strong>. According to CoinDesk<\/strong>, the legal cannabis industry\u2019s problems<\/a> “go much deeper than a lack of access to banking.” The question now is whether\u00a0cryptocurrency is a possible alternative to the\u00a0\u201clegacy financial system by accepting crypto payments and storing the money in crypto wallets rather than storing stacks of cash.\u201d<\/span><\/p>\n According to a CoinDesk report,\u00a0<\/span>“Crypto\u2019s inherent volatility and high transaction costs make it a poor substitute for cash, dissuading many potential cannabis business owners from going through the trouble of setting up a digital wallet and learning how to accept crypto payments.”\u00a0<\/p>\n In 2018<\/strong>, Coinbase shut down a<\/strong> Washington-based MMJ dispensary\u2019s account<\/a>, citing federal regulations.\u00a0<\/p>\n Even if cryptocurrency were the solution, there would be other issues that it could not legally fix, such as high taxes, low-profit margins, and black market competition.<\/p>\n Background:<\/strong> Silk Road, a darknet founded by Ross Ulbricht<\/a>, introduced the marijuana industry and the cryptocurrency sector. \u201cBefore being shut down by the FBI in 2013, the Silk Road allowed people to use bitcoin to buy and sell marijuana, which was at the time criminalized in many states.\u201d<\/p>\n However, there have been changes that normalized both industries\u00a0since then. CEO Ryan Hunter<\/strong> pointed to the\u00a0Crypto Cannabis Club<\/strong>, a social club for cannabis consumers, “basically uses NFTs<\/a> as the membership card,\u201d referring to non-fungible tokens.<\/p>\n People\u2019s DAO<\/strong> is a decentralized autonomous cannabis organization that is primarily for BIPOC leaders in the cannabis industry <\/a>to gain access to capital. Also, there are other organizations that provide NFT services to strengthen their community.<\/p>\n Henry Baskerville<\/strong>, the owner of Colorado-based law firm Fortis Law Partners, told CoinDesk that the Section 280E tax requirements mean cannabis companies pay around a 70% tax rate, compared with the average corporate tax rate of 20%.<\/p>\n \u201cA lot of people get into cannabis thinking that they\u2019ll make money hand over fist, but they aren\u2019t taking into consideration these taxes and smaller profit margins, so they fail,\u201d Baskerville said.<\/p>\n Section 280E<\/strong>, states that businesses selling cannabis<\/a>,\u00a0or any other federally illegal controlled substance,\u00a0cannot deduct any expenses incurred in the production, distribution\u00a0and sale of that product.<\/p>\n With tight profit margins and cash flow issues<\/strong>, the\u00a0volatility of cryptocurrencies would also be a risk for cannabis companies.<\/p>\n The Secure and Fair Enforcement (SAFE) Banking in Cannabis Act<\/strong> was created to give cannabis businesses in legal-use states what they are lacking today: safe and affordable access to banking services.<\/p>\n The bill<\/a>, introduced by Colorado Rep. Ed Perlmutter<\/strong>, sets up protections for banks and credit unions so that they can offer loans, capital investment, and other services to cannabis companies in states with legal markets.<\/p>\n In June<\/strong>, the Senate\u00a0rejected for the sixth time<\/a>, the bipartisan marijuana banking legislation in the final version of the United States Innovation and Competition Act<\/strong> (a.k.a The America COMPETES Act).<\/p>\n \u201cSAFE won\u2019t clean up all of the industry\u2019s problems, but it would have a significant impact,\u201d Baskerville told CoinDesk. \u201cSome cannabis business owners are paying in the range of $2K a month just for the pleasure of having a bank account.\u201d<\/p>\n Sundie Seefried, <\/strong>CEO\u00a0and president of Safe Harbor Financial<\/a>, which has provided cannabis banking services since 2015 and processed more than $14 billion, is excited about the possible implementation of blockchain technology. \u201cStart to finish, I know that\u2019s a legitimate [cannabis] plant right from the get-go if we do this correctly,\u201d Seefried said<\/a> about the potential of integrating blockchain technology<\/strong>.<\/p>\n “The cannabis industry has a lot of friction, a lot of redundancy, and a lot of authentication. That’s a problem, and through the use of blockchain technology, everything is transparent,” said Ben Bartlett,<\/strong> a member of the city council of Berkeley, California\u00a0and a crypto lawyer. “With the automated use of smart contracts, it significantly decreases the amount of friction in the cannabis industry.”Is Cryptocurrency A Possible Solution?<\/h3>\n
Cannabis, Crypto & Social Equity<\/h3>\n
Marijuana Banking Reform Is Needed<\/h3>\n
How About Blockchain Technology?<\/h3>\n
\nPhoto: Courtesy Of Pietro Jeng<\/a> On Unsplash<\/a><\/em><\/p>\n<\/div>\n