Crypto In The Cannabis Industry

Via AskGrowers

The legal cannabis industry is in something of a pickle. On the one hand, the vast majority of citizens support cannabis legalization, both medicinally and recreationally. We see this reflected every year in local elections that bring more and more parts of the country into the legal cannabis fold.

And yet, despite broad public support, marijuana remains illegal at the federal level. Not only does this give cannabis businesses a complicated legal status even in states that have approved them, but it also makes banking impossible.

Crypto has the potential to help unbanked cannabis businesses enjoy more autonomy and security.

The Problem Having more cash money than you know what to do with is many people’s dream. In fact, that’s just the problem. It’s well known that cannabis businesses rely primarily on paper currency, making them prime targets for robbers who know they can make a big score.

Of course, on the consumer end, the cannabis businesses' tumultuous relationship with banking (and, for that matter, most major credit card companies) is extremely inconvenient. The majority of people don’t even carry significant sums of cash anymore.

That means that the average cannabis customer often finds themselves stopping off at the very same banks who want nothing to do with the industry before making their purchase.

Being the target of a violent crime weighs on the minds of cannabis stores all throughout the country. Currently, a legislative option titled the “Safe Banking Act” looks to remove the obstacles that cannabis businesses the nation over faces daily. Unfortunately, the wheels of congress turn slowly, and the history of legal cannabis seems to show that they assume a particularly relaxed pace where this plant is concerned.

While legislative efforts continue, crypto has the power to help small business owners protect their money while simultaneously taking an enormous target off of their backs.

Completely Unbanked?

It should be worth noting that the cannabis industry is not actually completely unbanked. There are institutions that, at their own discretion have allowed cannabis businesses to access their services. Typically, however, these services are accompanied by enormous fees.

Larger cannabis businesses may be able to cover the cost of banking. Smaller ones invariably cannot, leaving them at both a significant disadvantage and a much greater risk than their larger competitors.

Crypto Paves the Way

Cutting through the storm is the simple clarity of cryptocurrencies. For businesses that want enhanced safety and simple customer friendliness, no other option provides half so many benefits.

• Lower Fees: While cryptocurrencies typically do come with fees of their own, they don’t even approach what is being offered at the few banks that do businesses with cannabis companies. For the struggling mom and pa shop—who, it should be noted, are often cited as the very people who are supposed to be benefitting from legal cannabis—banking fees aren’t an option. Crypto fees, on the other hand, may well be.
• Cashless Transactions: It’s already been well established that cash transactions pose a sincere threat to people operating within the cannabis industry. The risk of robbery looms large, and the perpetual need to stop at an ATM to make a simple purchase simultaneously aggravates the cannabis customer base. Cashless transactions make things easier, and significantly more convenient.
• User Friendly: Cannabis, like any industry, has the responsibility to operate with a degree of transparency. This can be somewhat difficult for a cash business to accomplish. Crypto, on the other hand, has a way of making things easier. By generating ledgers and other clear records, cryptocurrencies help establish a clear record. Not only does this aid in compliance, but it also frees business owners up to focus on tasks that are more pertinent to the running of their shop.
• Taking it Global: The cash-heavy world of cannabis also makes it very difficult to make global payments. For that matter, it can complicate business transactions of any kind. A business keeping their cash in crypto can effortlessly do business with anyone in the world.

Issues

Is crypto a fix-all? It certainly is not. For one thing, it tends to solve some accounting problems while creating others. Business owners are responsible for converting their cryptocurrency into dollar equivalencies to pay taxes. This can make it very difficult to get a clear understanding of what is owed, or even how much cash you actually have.

It’s also important to keep in mind that cryptocurrency is incredibly volatile. In fact, crypto most frequently finds its way into the news cycle by increasing sharply in value, or in taking a drastic plunge. This means that crypto-dependent business owners could plausibly wake up one day to find their revenue disappeared just as surely and permanently as it would have in a robbery.

These potential risks are sure to weigh heavily on the mind of any business owner wrestling with the possibility of crypto-driven transactions. For this reason, crypto and cannabis are likely to enjoy only a transitory relationship, helping business owners manage while their legal status continues to suffer idly in limbo.

The good news is that in the House at least, the Safe Banking bill is broadly accepted and approved. As Rep. Ed Perlmutter put it “#SAFEBanking will strengthen the security of our financial system & keep bad actors like cartels out. Most importantly, it will reduce the risk of violent crime in our communities. It's passed the House 5 times. We cannot wait any longer to address this public safety threat.”

The Roadblock

Presently, the Senate continues to thwart efforts to move towards safe banking. At the time of writing, the last failed attempt to move Safe Banking into law occurred in December of 2021.

This should pose little surprise given the general deadlock taking place within this legislative branch. Nevertheless, hope persists in the form of a receptive House that continues to try and press the bill forward.

What A Win Means

A win would (or will if we wish to be optimistic) grant the cannabis industry with the immediate benefit of enhanced safety. In addition to making business operations easier to manage (and pleasing customers in the bargain) it will also mark a definitive step towards legitimacy.

Of course, the Banking bill is not designed to make cannabis legal at the federal level. That would require an entirely separate legislative action. Nevertheless, none could deny that it represents an enormous step forward.

Frustrations notwithstanding, legal cannabis continues to enjoy wins all across the country. The support is there, and it is often accompanied by significant public goodwill and enthusiasm. It’s reasonable to assume that safe banking will eventually be standard for the cannabis industry. Until then, crypto may offer an alternative to desperate business owners.