We Implemented Cryptocurrency In Our Cannabis Business. Here's What We Found.
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If you’re a cannabis entrepreneur, you already know that banking and payment processing are major issues in the cannabis industry.
There are limited payment options if you sell CBD. It is magnitudes more difficult if you are selling THC-centered products.
Last year, banking issues in the cannabis industry reached the national spotlight when NPR published the aptly-titled article “Bags Of Cash, Armed Guards And Wary Banks: The Edgy Life Of A Cannabis Company CFO”.
Once (or if) you can find a bank to work with, your bank account runs the risk of being shut down at a moment’s notice.
Then, you face the challenge of payment processing. It’s more difficult for startups with no payment processing history to obtain one. And if a payment processor decides to ban you, your business will be left temporarily unable to accept credit cards.
On top of that, processing fees in the cannabis industry are significantly higher when compared to traditional commerce. We are talking between 4 percent and 6 percent, triple the average of other industries.
A solution is on the horizon.
An emerging, immature, and often misunderstood Bitcoin cryptocurrency technology was unleashed on the world in 2009. 11 years later, it has come a long way. Bitcoin can be bought and sold in every country. Mainstream financial channels like CNBC and Bloomberg have teams dedicated to Bitcoin technology.
The promise is appealing. You can be your own bank. No more frozen funds. Transactions can’t be censored and the fees cost next to nothing. Plus, payment processing cannot be shut off, unlike traditional banking.
Cryptocurrencies like Bitcoin, Bitcoin Cash, and Ethereum intend to solve the problems faced by high-risk banking industries. It’s worth noting that on a dark web marketplace known as the Silk Road, the number one product sold (by far) was marijuana. The Silk Road is now defunct, but when it was still functioning back in 2011, it showed that Bitcoin has a role to play as a digital currency.
Is cryptocurrency a viable payment solution for your cannabis business?
“I have no idea what Bitcoin is.”
Like many new technologies, cryptocurrency is not easy to understand. The complexity is where most people lose interest.
Here’s something to think about: Most of us do not know how the internet works. Transferring data via "packets," the interaction of protocols like TCP, SMTP, and HTTPS, it’s all quite detailed under the hood. But this does not prevent you from shopping online, sending an email, or reading this article.
Our company had prior experience with cryptocurrency, so it made the decision easier than it would be for other cannabis entrepreneurs.
Now that you want to enable the payment option, you have to get set up.
To accept online payments, we used the free tool Coinbase Commerce, which integrates with Shopify, WooCommerce and most major platforms. It took us about 30 minutes from signing up to having it live.
We were set up and ready to go, except for one thing: customers.
“Come spend your crypto!”
If you spend even 15 minutes interacting with the cryptocurrency community on Twitter, Reddit, or anywhere else, you’ll quickly see they are a passionate, enthusiastic (albeit tribal) group.
By sharing a few links on Reddit channels, we received cryptocurrency orders on the first day.
The most interesting and effective part was our charity initiative. By using cryptocurrency to cross borders and feed people in Venezuela and South Sudan, two countries with extremely limited banking options, it showed a fundamental advantage cryptocurrency holds over traditional banking.
It sparked some sales and press for our startup. A few CBD stores reached out to us asking how they could accept cryptocurrency. Even our coffee supplier is open to receiving Bitcoin. There is a lot of underlying interest in the cannabis industry, but they are primarily spectators who aren’t sure how to participate.
A few months later...
After a few months of time has passed using cryptocurrency, it has been a positive experience. We think all cannabis companies should consider accepting Bitcoin at their business. Keep in mind, cryptocurrency orders are only a small fraction of our total orders. That should be expected at any cannabis company. Your dollars will not turn into Bitcoin overnight.
That’s not to say there aren’t some drawbacks to consider. First off, if you use Coinbase Commerce, you’ll have to manually convert your cryptocurrency back into U.S. Dollars. There are services like GoCoin that do this for you for a 1 percent fee (still a lot cheaper than credit card processing).
Second, if you have storefront locations, the cashiers will have to know how to accept payments. AnyPay offers a free POS app, but like any software, it still takes some time to learn.
In the coming years, cryptocurrency has the potential for exponential growth, and there are perks to being an early adopter. I’d encourage you to be skeptical of “experts” who dismiss cryptocurrency in its early days. Remember, Paul Krugman, the Nobel Prize-winning economist, once predicted: "By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.”
Cryptocurrency will not be a magic bullet for your business. But in an industry that has an uncertain banking future, why not offer your customers an additional payment method and get some free press in the process?