While the cannabis industry is poised to generate over 20 billion dollars in revenue by 2021 the industry continues to operate as a primarily cash transaction only business. Current federal banking laws have prevented legal cannabis companies from using traditional banking methods because cannabis is still classified as a Schedule One substance which leaves banks vulnerable to federal prosecution for money laundering. There are a handful of banks who are recently taking on cannabis companies as customers. The services that the banks provide their cannabis business customers are limited. This gives way to many other issues that leave cannabis companies vulnerable in multiple ways.
Cannabis companies are operating as multi-million dollar cash businesses leaving them susceptible to crime. The best solutions would of course be either federally legalizing cannabis or enacting a federal banking law which would allow banks to take on cannabis companies with no risk of federal prosecution. However, movement towards those solutions is not moving as fast as the cannabis industry is growing.
Dealing in cash only means cannabis companies have the extra burden of handling everything from rent to payroll to taxes with actual money. Not only is this dangerous it is also expensive. No other industry has had to face this particular issue which is why payment systems that use Blockchain Technology are especially attractive to cannabis companies. Blockchain Technology is a time-stamped series of immutable record of data that is managed by a cluster of computers not owned by any single entity. Think of it as a technology as revolutionary as the Internet when it was introduced 30 years ago.
It is especially useful for an industry like cannabis simply because it gives ledger records which are immutable. One of the things that helps protect cannabis companies from federal scrutiny for illegal activity is immaculate record keeping. A Blockchain payment system is already set up to do just that. This is also an added plus for financial and government institutions who wish to regulate, tax, or audit cannabis companies. The records will always be transparent and available giving cannabis companies a built-in solution to two problems, banking and regulation. Blockchain Technology will also allow cannabis companies to improve their operations because they will be able to monitor their records from growers to retail.
Now, here is where it gets interesting. Because Blockchain Technology is decentralized and secure it eliminates the need for a “middleman” or institutions such as banks. Banks which normally provide services such as payments, credit, securities, or loans are not needed when using a Blockchain system. Blockchain is the technology that could completely change how we think about banking forever and the cannabis industry may give it the financial power that it needs to do exactly that.
Basically, if the federal banking laws do not move fast enough to solve the cannabis banking issues Blockchain payment systems will become the go to financial solution. This will potentially put billions of dollars into cryptocurrencies and kill banks as we know them. Just think about how the Internet killed the traditional record industry; this is what banks are facing with the introduction of Blockchain Technology. Banks will either have to adapt and find a way to assimilate the technology into their own systems or face extinction.
In the meantime, cannabis companies do have a solution to their banking problems, it’s a Blockchain payment system.
If you are looking for a cannabis banking solution please contact us.