Cryptocurrency and the Allure of a Cashless Cannabis Industry
Marijuana prohibition never stopped marijuana sales. Blocking legal marijuana businesses from the legal banking system isn't working, either.
The legal marijuana industry in the United States is awash in cash. Literally.
With reports that cannabis businesses generated almost $61 million in tax revenue for California in just the first quarter of recreational marijuana sales, it’s important to remember that the money moving through the marijuana financial system is almost 100 percent in cash. Why? Most banks won’t touch money from legal marijuana businesses because cannabis remains a Schedule I illegal drug at the federal level, meaning banks in the strictest sense risk committing crime providing the industry ordinary commercial banking services. That leaves marijuana entrepreneurs working in a cash-only world.
It’s more than just inconvenient. It makes it more difficult to create a safe environment for both employees and customers. It makes it next-to-impossible to get loans to start or grow a business. It also makes tracking marijuana transactions more difficult for businesses and the government.
Cryptocurrency companies, using blockchain technology, are hoping to step into the gap. At the recent CoinDesk’s Consensus 2018 conference in New York City, many companies touted blockchain and cryptocurrency as a potential cure for the marijuana industry’s financial headache. The conference attracted thousands. More than $17 million in ticket sales were made for the event, held at the New York Hilton Midtown.
Blockchain provides a transparent, secure digital transaction record that can be accessed by all users. It’s most associated with Bitcoin. One of the main topics at the conference was how can blockchain be used in the cannabis industry.
The idea of cryptocurrency in the marijuana industry gained momentum late last year when researchers at IBM advised the government in British Columbia, Canada, to use blockchain to for seed-to-sale tracking of legal marijuana. Legal recreational marijuana sales are expected to begin in July across Canada.
Now startups, or more specifically their financial backers, are putting their money behind this theory. Companies that have developed blockchain technology and cryptocurrencies aimed at use in the marijuana industry are springing up like weeds. For examples:
- Cannabis social media hub MassRoots is now transitioning to a marijuana-focused software company, tying blockchain to its marijuana point-of-sale tracking business, MassRoots Retail.
- Alt Thirty Six, which uses the cryptocurrency Dash, has partnered with cannabis software company Webjoint to provide access to its digital transaction system for the marijuana-related businesses Webjoint serves in California.
- Software company Greenstream is building a blockchain-based supply chain system for the cannabis industry that could be accessed by retailers, suppliers and regulators
If it all seems a bit like Silicon Valley in the 1990s and 2000s, that’s because it is. The marijuana industry has gone from nowhere to a multibillion-dollar industry in just a few years, yet people are still carrying around their profits in leather satchels. At some point, that is going to end. If the federal government doesn’t provide a solution, then cryptocurrency might.