Colorado Moves to Provide Banking to Cannabis Sector
May 14th, 2014
Policy, Top News
The Colorado legislature voted to create the nation’s first state-run financial cooperative for cannabis vendors earlier this week. Working through the U.S. Federal Reserve, newly legalized cannabis dispensaries would have access to banking services for the first time ever. Many commercial banks and credit unions have been hesitant to work with the industry given the federal government’s stance.
Under federal law, cannabis remains a Schedule I Controlled Substance, which is the same as heroin or cocaine. The U.S. Justice Department tried to assure banks that they would not be charged with money launder or racketeering if they dealt only with approved cannabis companies in states where the drug is legal, but the reassurance wasn’t sufficient and many banks didn’t want to take the risk.
The cannabis industry was left with an interesting problem: Cash from their operations either had to be reinvested into the business or stored on-site in floor vaults and other areas. Unfortunately, the large amounts of cash on hand have made dispensaries and attractive target for burglaries and robberies. Colorado’s move to create a banking cooperative is aimed at solving these key problems.
As an added benefit, access to the banking sector will make it easier for state regulators to track sales and ensure proper taxation. Many cash businesses do not properly report taxes, which could mean that tax revenues are understated. Credit card processing and check cashing could also help dispensaries broaden their customer base by accepting more forms of payment than just cash.
Governor John Hickenlooper must now sign the bill that will then require some level of federal approval before becoming available. While many are skeptical that the Federal Reserve will approve the plan, the Justice Department’s comments have made it clear that the Obama Administration is keen on providing legal banking options to a sector that they have allowed to grow significantly.
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.
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