The Sessions move means the cannabis industry is scrambling for ways to handle cash flow from legal marijuana sales. This has spurred marijuana businesses to turn to blockchain technology and cryptocurrencies to process transactions.
Here are the quick need-to-knows:
- On Jan 4. Sessions removed Obama-era guidelines – also known as the Cole Memo – to bring back federal regulation in states where marijuana is legal
- Since Sessions’ move, banks and credit unions have even less incentive to help
- This has left the cannabis industry scrambling for ways to handle all the cash flowing from legal recreational marijuana
Banking across the United States has frozen for most marijuana businesses. Robert McVay, a lawyer focusing on cannabis law says there couldn’t have been a worse time for the Sessions move to occur. Mcvay says,
“because now is the time that the types of banks and credit unions that are willing to take on more risk would have been entering the market”
Instead, financial institutions are avoiding the risk altogether. And if banks are not already involved in the cannabis industry, the retraction of the Cole Memo isn’t the best place to begin their investment.
Startups offer cash alternative solutions to banking
To help marijuana businesses deal with large quantities of cash, a variety of startups have offered electronic transaction services. CanPay is one of the more used platforms. It offers an app that conducts debit services via a customer’s digital wallet.
However, the foundation of CanPay’s model is built upon banks and credit unions open to working with cannabis businesses. They relied on protections provided by the Cole Memo. CanPay’s CEO Dustin Eide says now that the Sessions move is in full effect, banks are now highly fearful. This has caused them to back out of business,
“Some have stopped taking on new accounts. We do know of one institution that was getting ready to launch cannabis banking program that has decided to suspend their launch indefinitely.”
But Eide is less concerned about losing existing partnerships than he is about creating new ones. He says: “People that are heavily invested in the industry are continuing to move forward. I think the bigger issue is bringing new institutions into new markets.”
Blockchain technology and cryptocurrencies
A portion of the industry is hoping that blockchain technology and cryptocurrencies provide the solution to the overflows of marijuana cash. And there may be hope still. Companies like SinglePoint and POSaBIT are striving to create a payment method for dispensaries via Bitcoin.
Recent years have also seen the rise of cryptocurrencies like PotCoin and HempCoin. These are geared specifically for cannabis transactions. Bitcoin saw its rise due to its use to purchase illegal drugs on the infamous site Silk Road. Ironically, marijuana businesses now hope it will provide legitimacy.
“That reputation is being turned around,”
said Wil Ralston, president of SinglePoint. SinglePoint is creating an app called “SingleSeed,” where consumers and dispensaries can exchange Bitcoin.
In recent news, fear of regulatory crackdowns caused Bitcoin to drop under 10,000, 50% of the all-time high. This triggered a massive selloff of cryptocurrencies. As the marijuana industry searches for legitimacy, the industry around cryptocurrencies and blockchain technology is striving for stability.
Maybe the two industries can find what they need in each other.