The January 1 state licensing deadline is approaching and the Los Angeles cannabis market is about to explode. Meanwhile, banking remains an issue for this flourishing industry. However, just as cannabis thrives in the grey area, so does cryptocurrency where conventional banking fails. As the California cannabis market soars, so does the cryptocurrency market in California, and in the near future, they may increasingly overlap.
Please allow us to introduce the increasingly ubiquitous world of cryptocurrency, which may soon provide the solution.
“As a result, cryptocurrencies are not subject to the same federal restrictions as banks, which means cannabis businesses can easily set up wallet addresses and perform non-cash transactions without fear of federal interference.”
What is Cryptocurrency?
Cryptocurrency is a medium of online exchange, secured by the principles of cryptography to encrypt the data of anonymous transactions onto a blockchain—a large database, therein making the transactions immutable and irreversible. Cryptocurrency is virtual money, so it is neither controlled nor limited by the Federal Reserve System, seemingly avoiding federal cannabis prohibitions. As a result, cryptocurrencies are not subject to the same federal restrictions as banks, which means cannabis businesses can easily set up wallet addresses and perform non-cash transactions without fear of federal interference.
After Bitcoin (BTC) became infamous for its anonymity and consequently disreputable use through online black markets like the Silk Road, FinCen regulation was extended to include the booming cryptocurrency market. Now, since currency exchange sites are subject to the Bank Secrecy Act and related anti-money laundering (AML) laws, cryptocurrency is loosely regulated by U.S. AML regulation.
How Can I Use Cryptocurrency in Cannabis?
Cryptocurrencies, including BTC, do not provide a tangible card or token to access virtual money for use in traditional payment transactions, which unfortunately makes them largely inconvenient for anything other than online purchases or for investment purposes. However, a new BTC exchange system by SinglePoint, Inc. will soon provide a service allowing cannabis merchants to process bitcoin through debit and credit card transactions, allowing dispensaries to conduct non-cash sales like in any other store. A beta version of the solution is set to debut this month at the Las Vegas Marijuana Business MJBizCon event. The solution is compliant with AML regulation, and while it is cannabis-driven, it could be utilized for other kinds of transactions, which provides far greater access to virtual currency for everyday purchases.
Several cannabis-specific virtual currencies have been launched as a non-bitcoin related attempt to solve the industry’s banking problems. As of yet, none provide debit and credit card transaction services, but both PotCoin (POT) and CannabisCoin (CANN) have innovative alternatives to banking systems. Launched in January 2014, PotCoin was one of the first cannabis-specific virtual currencies, which has recently grown in notoriety due to a press release showing NBA star Dennis Rodman sporting a “potcoin.com” T-shirt during a trip to North Korea—which the virtual currency sponsored! As of February 2014, the coin was worth $0.004625, and following the Rodman-event the coin grew to $0.179644, a huge 3,784 percent—a massive rate of return. PotCoin has already established one ATM in Denver and provided the company continues at this rate of growth, they may install more.
While CannabisCoin has a far smaller market cap ($2 million versus $14 million for PotCoin), they do draw interest with their novel idea. CANN plans to sell virtual currency that owners can convert directly to cannabis, with the desired effect of making the cannabis cheaper. The company plans to make one CANN unit exchangeable for one gram of cannabis, specifically a strain they are specially growing and naming “CANNdy”. Given the fact that one CANN is presently worth $0.03, provided the company does eventually take off, it may be worth investing now to take advantage of the cheap rate of exchange.
Although some of these concepts may seem intangible and overcomplicated, many experts agree that cryptocurrency is the future of banking and may be the cannabis industry’s knight in shining armor.