As the legalization of cannabis production and distribution gains ground nationally, the glaring need for banking, billing and payment processing reform becomes increasingly apparent.
Federal prohibitions require banks to stand on the sidelines, amplifying the risk of violent crime due to the cash that needs to be moved around in the absence of banking options. Prudent storeowners continue to seek legal alternatives to alleviate the payment problem in the interim, but there is unanimous agreement that the only real solution is to enact sweeping reforms like those recently proposed in the U.S. Senate as part of the CARERS Act.
NBC News recently reported that 325 legal marijuana shops operating in Denver during the past two years reported 317 burglaries and seven robberies, an annual crime rate that only underscores the fact that having cash on hand due to a lack of payment processing puts a target on cannabis storefronts.
“We are a licensed, state-regulated business in Washington State, just like a liquor store, and we carefully follow the laws of all authorities with proper jurisdiction, just like any supermarket or electronics store in the state” said Boris, general manager of the Bel-Mar store in Bellevue Washington. “We are lucky to have a credit union, Salal, which works closely with us to make sure everything is documented and aboveboard. Still, I don’t understand why a legal, licensed business like ours doesn’t get to open an account at a regular bank just like a liquor store.”
While many stores have taken steps to provide an ATM within their walls, and some have used alternatives like PIN-less debit cards to complete transactions, the preference for traditional payment options like credit cards and the ability of a merchant to use standard banking resources remains at the very top of the list for cannabis industry insiders interested in providing a quality experience for customers, employees, and the public at large—especially because banking alternatives would reduce the cash-dominant position that puts many stores at risk right now.
There is also a growing call by some for the use of cryptocurrency like Bitcoin as an intermediary fiat to fill the gap between a customer buying medicine and a dispensary paying its vendors. “Simply put, digital currency represents an incredible opportunity for the legal MJ industry to transact for THC products online, for in-store collection or —where allowed — courier delivery, completely side-stepping current federal banking restrictions,” according to Rob Wilson, CEO of Bitscan.com “Further, the fintech infrastructure growing around Bitcoin and the blockchain makes it possible for consumers to acquire Bitcoin seamlessly and in near real time, and merchants to exchange Bitcoin received in payment back to dollars in the same way. We are rapidly reaching the point where Bitcoin, while central to the transaction process, is virtually transparent to the trading parties.”
So, while some consider bitcoin to have been far too complicated in the past, these newer overlaying technologies allow people to make payments in dollars, with bitcoin underlying both sides of the transaction in the background. Federal law prohibits banks from directly handling cannabis-related transactions, but the law remains largely silent on whether bitcoin-processed transactions are allowed, a gray area of uncertainty that is unlikely to be clarified anytime soon.
“WeedBilling.com is in the process of vetting a surprisingly large number of alternative processing methods that have been concocted by companies that understand the importance of solving the problems created by current federal law. Our goal is to offer clients a true, legal, and sustainable way to do business without the problems associated with cash or the uncertainty of cryptocurrency,” said Justin of WeedBilling.com. “The ironic thing is that the same federal laws that prohibit cannabis transactions by banks are the sole reason why stores resort to cash transactions — which everyone agrees are the least secure, hardest to track, and most inconvenient way for companies to do business. If the government really wants to tax and regulate cannabis, they need to provide a legal framework for the paper trail and bank processing that ought to accompany any commercial flow of money.”
The truth is that the federal government’s inaction with regard to marijuana banking reform results in uncertainty, inefficiency, and an increase in crimes related to the handling of tax dollars collected on behalf of states at the point of sale. The solution is as simple as passing the CARERS Act.
By Stewart Tongue