Many Legal Cannabis Companies Should Look to Adopt Cryptocurrencies For Payments
Even though cannabis businesses have been seemingly booming since the call for legalization in the US and many western countries, many financial organizations have been not treating the booming industry right.
The U.S. remains a highly complicated space for cannabis companies and investors, in large part because, while cannabis remains illegal at the federal level, a growing number of states have allowed cannabis companies in thanks to local legalization decisions.
Companies are forced to deal with multiple legal and financial barriers, with many companies having to seek out capital from Canadian investors. Other outfits have to navigate the complicated world of importing and exporting products which remain federally illegal, as well as the issues surrounding operating across state lines when laws change dramatically around the country.
Another issue facing the U.S. market is banking. Congress has yet to lift banking restrictions which have limited the potential for expansion among U.S.-based cannabis firms. Investors should watch out for news about the SAFE Banking Act and the STATES Act, both of which could have a dramatic impact on the ability of U.S. cannabis companies to grow and thrive.
A different complication for most dispensaries is that they can’t access typical merchant services, which companies need to accept credit or debit cards. There is no “cannabis” store identification, as there is with a flower shop or restaurant, and so most dispensaries remain cash only.
Can crypto help solve the financial problems?
People who cannot secure funding from private investors must seek their funding elsewhere. Crowdfunding is an option. Cannabis sector entrepreneurs are entitled to involve in crowdfunding initiatives under the JOBS Act. Title IV permits small businesses to obtain up to $50 million in funding from public investors. Some Cannabis companies have gained profit in their ICOs, and have gone on to become relatively well-established firms. Paragon Coin and PotCoin are two examples of companies that have managed to stay afloat.
However, the use of cryptocurrencies comes with the baggage of legal problems as well. Converting Bitcoin into fiat comes with high transaction fees and are at a legal grey area in many states. Another problem is that many see bitcoin as an investment asset and don’t use it for transactions.
Before bitcoin was dominating headlines with its spectacular run-up, there were people using it to buy illegal drugs. But now, ironically, some people in the marijuana industry are hoping bitcoin will bolster its legitimacy.