Could Cryptocurrency Signal a New Era of Cannabis Banking?

Could Cryptocurrency Signal a New Era of Cannabis Banking?

It seems like the ups and downs of cryptocurrency have been grabbing headlines for months. While the unpredictability of this new, decentralized currency has prompted many to be skeptical, Bitcoin and the like have piqued the interest of cannabis business owners worldwide.

Without getting into all the technical details, cryptocurrencies are peer-to-peer virtual money. That means no bank has to approve transactions between people. And the blockchain technology upon which cryptocurrencies are built is inherently secure. Sure, you can’t physically pull a bitcoin or other cryptocurrency out of your pocket to pay for something at the grocery store, but that doesn’t mean they are worthless.

There are more than 1,000 different cryptocurrencies active worldwide and — as of December 2018 — their collective value totaled more than $500 billion. The number of currencies available may continue to grow, but the gist remains crypto represents a secure — albeit unpredictable — way to invest and exchange money.

Taking Canna-banking to the Next Level

So, what can crypto do for the cannabis industry? Understanding the benefits of virtual currency for the growing business of bud starts with investigating the barriers traditional banks present to legal cannabis companies.

Traditional banks bring along traditional standards and regulations. More specifically, they have hundreds of years of regulatory standards written to prevent money laundering and fraud. For cannabis business owners, any transaction related to marijuana must be identified as a suspicious activity — even in states where cannabis is legal — and a separate set of reports has to be filed when tax revenue is deposited in a state’s bank account. It’s confusing and, long story short, it means the IRS tends to flag decriminalized states as potential money launderers.

Looking at blockchain technology, which is totally secure, could show the validity of marijuana transactions at the state level, thus preventing any unnecessary red flags for fraud. While still in very early stages, blockchain and cryptocurrency could be the next big step toward legitimizing cannabis banking at the state and federal level.