Cannabis & Crypto: How They Could Benefit Each Other


Kelly Weimert

January 23rd, 2018

News


One of the biggest obstacles canna-businesses face is money management. Due to marijuana’s mixed legality across the country, financial institutions have proven more than a little hesitant to loan money to cannabis businesses for fear of incrimination and liability. Not only does this inhibit business growth but it also makes them more vulnerable to theft and violence as they move and hold mass amounts of cash. This has led an increasing number of people to explore cryptocurrency as a potential alternative.

With the astronomical rise of Bitcoin in recent months, more and more cannabis entrepreneurs are beginning to look at cryptocurrency as a viable solution to the weed business money problem. As a result, a growing number of crypto-companies are maneuvering their businesses to take advantage of the potential relationship between cannabis and cryptocurrency, including Global Payout, Inc. (GOHE), SinglePoint, Inc. (SING), Bitcoin Investment Trust (GBTC), Bitcoin Services, Inc. (BTSC), and Riot Blockchain, Inc. (RIOT). But just because these companies are angling themselves toward the cannabis industry, doesn’t mean the cannabis industry should do the same.

Some experts in the industry believe that despite cryptocurrency’s ability to bypass traditional banking, adapting it to canna-businesses could actually hurt the legitimacy of the industry in the long run.

Krista Whitley, CEO of Altitude Products, a Nevada-based cannabis company, told Business Insider that while she’s “very enthusiastic” about cryptocurrency’s potential to solve financial problems in the industry, it can also “draw unwanted attention,” to law-abiding dispensaries.

Cannabis dispensaries must adhere to a strict set of reporting standards that were put in place to ensure the drug isn’t diverted into the black market as a way of avoiding taxes. To help with this, there are a growing number of software platforms designed to track all dispensary pot, from seed to sale, to show state regulators, but using cryptocurrency would make this meticulous tracking a lot more difficult as the platforms aren’t designed for it. Because cryptocurrencies are digital, some in the industry believe the need to use different tracking methods will invite unwanted scrutiny and potentially federal interference, especially since Attorney General Jeff Sessions rescinded the Obama-era Cole memo, which protected states’ legal cannabis rights.

Zachary Zises, a Chicago dispensary owner, told Green Market Report, “We have too many strict state and federal standards to meet, and right now, the cryptocurrencies don’t allow us to meet those high standards.”

However, despite the reluctance of many entrepreneurs to dip their toes into the crypto-cannabis waters, there are a number of dispensaries and cannabis companies who are experimenting with using it in creative ways.

For example, POSaBIT, a small cannabis startup, has installed kiosks in legal dispensaries where customers can use their credit cards to purchase Bitcoin, which can in turn be used at the store to buy cannabis products. And the aforementioned SinglePoint company is developing an app called “SingleSeed,” which will allow consumers and dispensaries to directly exchange Bitcoins with one another. Both moves are designed to make it easier for customers to make purchases with cryptocurrency as the current difficulty for customers to pay with it directly is one of the major barriers to using it.

Proponents of using cryptocurrency for cannabis exchanges argue that it’s safer and more secure than using all of the cash that flows in and out of businesses as of now, and therefore more moves should be made on both customers’ and companies’ parts to use it. Jeffrey Zucker, co-founder of Green Lion Partners, told CNBC, “It’s an unnecessary risk” that makes companies susceptible to being robbed and losing all of their funds. “[Cryptocurrencies] could help the operator to avoid cash on hand, and therefore make it a little less dangerous for them.”

All of that being said, like most aspects of the cannabis industry, much is uncertain when it comes to the future relationship between cryptocurrency and cannabis. While some industry leaders think it’s the perfect solution, others fear it’ll ultimately threaten the legitimacy of the entire industry. And muddying the waters, even more, is the fact that banks could very well end up opening their doors to canna-businesses in the future, which would dramatically shift the way things are currently done.

Sessions’ above-mentioned move to rescind the Cole memo went directly against the majority interests of both Democrats and Republicans, which some believe could be the push Congress needs to finally make the drug federally legal. And given that there’s already bipartisan pressure from lawmakers like Sen. Cory Gardner, Rep. Carlos Curbelo, and Rep. Earl Blumenauer to reduce the number of restrictions cannabis businesses are facing, it’s not an overly optimistic viewpoint. If cannabis does become federally legal, it would eliminate the legal uncertainty currently inhibiting bank loans and burst the doors of financial institutions wide open to canna-businesses, thereby eliminating the need for cryptocurrency entirely.

Bottom Line

Financial institutions’ reluctance to loan money to cannabis businesses makes cryptocurrency a potentially good alternative to managing funds and exchanges. However, using cryptocurrency for a canna-business should be done with discretion as it not only has the potential to invite federal scrutiny but if cannabis becomes federally legal, it could very well render cryptocurrency for canna-businesses obsolete.

This article was published by CFN Enterprises Inc. (OTCQB: CNFN), owner and operator of CFN Media, the industry’s leading agency and digital financial media network dedicated to the burgeoning CBD and legal cannabis industries. Call +1 (833) 420-CNFN for more information.

About Kelly Weimert

Kelly is a full-time freelance writer based in Austin, TX. A happy hybrid of geek and hippie, when she's not nestled into her couch crankin' out crafty prose with her miscreant Chihuahua, you can find her frolicking outside to keep her sanity in check.


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