Although the legal marijuana industry in the United States has seen wild success since the legalization of recreational marijuana in Colorado, it still faces one major hurdle: finance. With no access to the banking system, the marijuana industry operates on a cash-only basis.
Banking Access: The Biggest Issue Facing Legal Marijuana
Two of the presenters at the 2018 Crypto Cannabis Conference in Denver — Mark Goldfogel from the Fourth Corner Credit Union and PureVision Tech founder Carl Lehrburger — highlighted one of the biggest issues facing the legal marijuana industry in the United States: banking.
Since cannabis remains illegal at the federal level, banks will not work with businesses in the cannabis industry, such as dispensaries and grow operations. Therefore, the entire industry relies on cash to operate, a difficult thing in a world moving towards exclusive use of banks cards and digital payments.
Here’s an example of what this situation looks like: every dispensary has an ATM, which customers must use to withdraw cash from their bank accounts to purchase product. Then, at the end of the day, the dispensaries hand the cash off to armed guards, who transport the money to a bank that has allowed the business to store their funds in an account. That is — if the business has found a bank actually willing to work with them.
And that process repeats every day, putting millions of dollars of cash in jeopardy as it sits in the store, and is transported on the open road.
Fourth Corner Credit Union: One Step Closer to Financial Services in the Cannabis Industry
Mark Goldfogel, after moving on from his cannabis production tracking service, sought to provide banking services to the Colorado cannabis industry. Goldfogel joined the Fourth Corner Credit Union, a non-profit bank providing financial services to cannabis businesses.
According to Goldfogel, things like blockchains and cryptocurrencies are cool, but not necessary. “Banks don’t need tech,” he said, “they need balls.”
So, Fourth Corner set out to prove that had balls.
However, the credit union ran into a big problem: the Federal Reserve. The Fed shut the bank down, saying they had no right no operate in their system while providing services to businesses that remained federally outlawed.
Remember that thing Goldfogel said about having balls? Yeah, Fourth Corner sued the Federal Reserve. And won. Now, the credit union is allowed to provide banking to cannabis businesses in Colorado, fully insured by the NCUA.
Unfortunately for the industry, the Fed’s greenlight came with a restriction: Fourth Corner cannot provide services to marijuana businesses. That is: business that deal with the consumption of marijuana products — such as dispensaries.
So while the lawsuit brought the credit union one step closer to giving the industry financial inclusion, they did not walk away with a total victory, leaving a financial services gap that still needs to be filled.
ICOs and State-Backed Weed Coins
With that gap still preventing many businesses from accessing banking services, other methods offer alternatives.
Carl Lehrburger’s PureVision Tech and PureVision Botanicals, for example, has launched an exploration into the possibility of holding an ICO in response to being cut off from mainstream financial services.
According to Lehrburger, an ICO would not only provide them with funding they currently can’t acquire elsewhere, but it will give them a token-based currency they can use internally, for things like bonuses and promotional deals.
Furthermore, Goldfogel mentioned a program starting up in California designed to help cannabis businesses in the state bypass banking restrictions all together. Issuing a state-sponsored, blockchain-based token, Caliornia businesses can conduct digital transactions and keep financial records without a need for banking services at all.
While Goldfogel doesn’t believe cryptocurrency has a very useful place in the cannabis industry, he said his position on the topic shifted when he learned of this California program.
Thus, with multiple solutions in the works, the legal marijuana industry inches closer to financial inclusion. But they still have a long way to go.
Do you think cryptocurrency can give the cannabis industry adequate financial services? Share your thoughts in the comments below.
Images via Pixabay, Evan Faggart