As the marijuana industry is expected to grow to $50 billion by 2026, businesses are itching to move the piles of cash sitting in their shops and dispensaries. Although medical marijuana is legal in 29 states and recreational marijuana is legal in eight, banks are reluctant to engage with pot businesses, since it is still illegal on a federal level.
With the legalization of recreational marijuana in California, the Los Angeles Times reported that the state is considering revolutionizing banking to allow transferring money from pot transactions through banks.
Dealing with cash is a big problem in the marijuana industry, as cannabis entrepreneurs need to store and carry millions of dollars for payment of salaries, suppliers, and taxes. This often promotes robbery and violence in legal states as thieves pursue access to paper money.
A few steps are being done to change this:
Some suggest a system of one bank accounting for all marijuana transactions, still following the federal regulations, and tracking any illegal or corrupt activities. A central bank will act as a single point for all pot transactions to occur. All payments for anything pot related is regulated through one bank even though the original money can be transferred from another state’s bank. According to the Los Angeles Times, Governor Jerry Brown administration’s officials are meeting with different banks and credit unions to make this possible.
California Treasurer, John Chiang, suggests a “separate, government-owned bank.”
However, Beth Mills, a spokeswoman for the California Bankers’ Assn. said to the LA Times that, “the drug is still illegal and working through a correspondent bank would not change the fact.”
Thus, start-up applications for Bitcoins are becoming more popular as legalization spurs more businesses. CNBC reported that the cannabis industry is turning to Bitcoin, which solves two problems including not having to store cash or using credit cards through transactions. One such Bitcoin company is, SinglePoint, which is creating an app called Single Seed for consumers to exchange bitcoins with dispensaries. SinglePoint started a mobile application payment system in 2014, but it was shut down by all banks, after they decided the risks were not worth it. The CEO of SinglePoint, Will Ralston, then started SingleSeed, using Bitcoin instead of traditional bank transaction currencies. Other crypto currencies are popular like, Hempcoin, which facilitates transactions between pot farmers and dispensaries.
So far, the biggest cons to Bitcoin, according to CNBC, includes paying a higher price as the Internal Revenue Service (IRS) still requires taxation under bitcoin, which means you have to pay taxes on gains. The biggest pro to using Bitcoin is privacy, where you are tracked by an identification number rather than your real name.