Bitcoin will resolve many problems the legal cannabis industry faces by reducing risk and expenses, and increasing transparency. So says Robert Stephan of Aroma Events, organizer of the third annual Crypto Cannabis Conference on Saturday 21st October 2017 in Denver, Colorado.
Until everyone’s using cryptocurrencies though, the industry faces obstacles every time it needs to interface with fiat money and mainstream finance. Crypto Cannabis Conference (CCC) bills itself as an educational event to keep participants up to date with the latest techniques to overcome them.
There will be plenty of panel discussions and Q&A sessions. The content is aimed also at newcomers to cryptocurrency who need to learn how it fits into their business.
“I’d like to see interested people being educated, a Bitcoin BootCamp, Stephan told Bitsonline. Hands on demos from wallet companies, ATM companies, mining companies, etc. Engaging with the attendees and making personal contact with those interested from the cannabis industry.”
Main Focus Still Bitcoin, Cannabis Altcoins ‘Useless’
In the past, the conference has been a Bitcoin-only event. In 2017 that will change slightly, with a livestream with Monero project leader Riccardo “FluffyPony” Spagni.
Stephan said many people requested more information on whether something like Monero is a suitable bitcoin alternative. However some remain concerned it could present more risk with its added complexity, lack of transparency, less liquid market, and lower adoption rate.
There’s also the never-ending parade of altcoins supposedly designed for the marijuana industry, including potcoin, marijuana coin, maryjane coin and cannabis coin. Their real benefit seems minimal at best — most feel more like publicity stunts and value pump attempts, and Stephan described them as “useless”.
Over $1 Billion Per Year – in Cash
Colorado’s legal cannabis industry is worth around $1 billion USD or more per year — working mainly in physical cash.
Despite that value, and the increasing decriminalization and even legality of cannabis in the U.S., most companies are still denied access to mainstream financial networks. That includes most bank accounts.
It’s a strange regulatory limbo for companies wishing to engage in legitimate and (in their state anyway) legal commerce. And it could be a perfect use case for cryptocurrencies and parallel financial systems.
Changing Laws, Attitudes at State Level Only
We’ve seen radical changes over the past two decades. This is due mainly to equally radical shifts in political and cultural attitudes — and vast differences that remain between jurisdictions.
Medical marijuana became legal in California in 1996. Within years, other states and territories followed. By 2017, eight states had even legalized it for recreational use. About 20 others have varying degrees of decriminalization and restriction, and three states still ban it outright for any reason.
But marijuana remains a Schedule 1 substance under U.S. federal law — which, given federal law supremacy under the Constitution, makes it illegal everywhere. Federal threats to enforce this have been more common than action so far, but it still deters banks.
Schedule 1 is still the highest classification, which the DEA defines as “a substance that has a high potential of being abused by its users and has no acceptable medical uses”. Though the medical and recreational cannabis industries would disagree strongly with this, it highlights the cultural battle they still face.
PayPal, National Banks Block Cannabis
So how does a business operate without a bank account?
“Since I started, I have learned a lot about what the cannabis industry is doing to manage their cash. The first option is to pay everything in cash, in person, taking all the risk themselves. The next option is to pay everything in cash, and pay armed guards to move the cash.”
Another option is to use an insurance agent to open an equity account, which is not uncommon but could be another gray area.
Fewer are even trying to use PayPal these days — the company has a reputation for shuttering cannabis-related accounts, and freezing funds. Credit card companies also refuse to touch the cannabis business, for fear of trouble from federal authorities.
Stephan pointed to The Fourth Corner Credit Union — chartered in the State of Colorado and formed in 2014 specifically to serve the cannabis industry. But it’s been blocked from holding a master account with the Federal Reserve.
Fourth Corner is suing the Fed to gain access. One district court dismissed the lawsuit with prejudice in December 2015, but an appeal is underway.
“I would be forcing the Reserve Bank to give a master license to a credit union that serves illegal businesses,” the judge said at the time.
Forced to Bank in a Strange Legal Limbo
“When I hear a dispensary owner/manager say they have banking, my favorite question is ‘What is the name of your bank?’ Because I know they can’t legally answer the question. Answering me would violate the strict NDA,” Stephan said.
According to Bruce Barcott in an article on Leafly, there are other local banks and credit unions with state-based charters. They include Seattle’s Salal Credit Union and Oregon’s Maps Credit Union.
These companies will work with marijuana-related businesses (MRBs) but it’s usually kept quiet. FinCEN reportedly allows them to stay unmolested by imposing strict but informal guidelines that include filing regular reports on their clients.
That’s expensive for independent dispensaries — up to $1,000 a month. And the guidelines aren’t even proper laws, meaning these relationships are still a gray area that could change on a whim.
Additionally, the credit union only stores the money. Storing and transporting thousands of dollars in paper cash takings (in $20 bills) every day presents a serious risk of robbery or worse.
If only there were some way for MRBs to accept digital payments, and not have to store cash…
Well They Should Use Bitcoin Then
Facing such hostile resistance, you’d say bitcoin acceptance is an obvious move for state-based cannabis companies. However, even that isn’t so straightforward — national payment processors like Coinbase and BitPay face similar regulations to PayPal, and ban them outright.
Suppliers, landlords, utilities and (ironically) tax authorities all need to be paid in dollars.
“Clearly this is not going to be an easy goal to achieve, to be able to spend Bitcoin as easy as they spend cash,” Stephan continued.
“My advice is to accept as much bitcoin as you can spend, if you don’t want to risk holding any due to price volatility. While encouraging those you pay cash to, to accept bitcoin. Until everywhere your business needs to spend money accepts bitcoin.”
“Then, banking will be a moot issue.”
About the Crypto Cannabis Conference
The Crypto Cannabis Conference started in 2015, with people telling Stephan it was “too early”. He’s fine with that, though.
His goal is to double attendance every year. In 2015 about 80 registered, and 50 checked in. That increased to 120/90 at the second event in 2016.
This year’s venue, BAR STANDARD in downtown Denver, has a capacity for 300 standing and 175 seated. Stephan said he wants to max out the seating room, at least.
To find out more about Crypto Cannabis 2017, check out the website. There’s Basic Passes with plenty of extra goodies, Spectator Passes with more, and VIP Passes with everything included. The conference is also looking for sponsors and promo table operators.
Can Bitcoin help the legal cannabis industry? Let’s hear your thoughts.
Images via Crypto Cannabis Conference 2017, Bar Standard, Pixabay