Banking in the cannabis industry has been a struggle since legalization. Banks, credit card companies, and even online payment apps such as PayPal have refused to work with businesses that traffic in cannabis—mainly because federal law requires banks to disclose marijuana-related transactions as suspicious activity.
“As a federally regulated institution, we don’t process payments for businesses participating in federally prohibited activities,” a Chase spokesman told Forbes.
That leaves many canna-businesses with two options: make a cash-only business or lie to the bank. The problem with choosing the later option is that cannabusinesses are inevitably caught and have to face the consequences.
People rarely carry cash nowadays, but when that’s the only way to make an expensive medical or recreational marijuana purchase, you make do. However, that could all be changing thanks to Bitcoin.
Take Tim Cullen, the proprietor of the Colorado Harvest Company, as an example. According to The Pew Charitable Trusts, when a bank discovered his account was linked to marijuana cultivation, not only did they shut down his account, but they also shut down his family members’ accounts, including his three-year old son’s college savings account.
This makes things miserable for cannabusinesses and consumers. People rarely carry cash nowadays, but when that’s the only way to make an expensive medical or recreational marijuana purchase, you make do. However, that could all be changing thanks to Bitcoin.
Bitcoin—The Cannabusiness Payment Solution
According to Motherboard, Colorado farmers are turning to Bitcoin to cure their banking woes. In fact, that’s exactly what Veronica Carpio, the 38-year-old owner of the largest hemp seed exchange in Colorado did.
After dealing with dozens of banking issues with PayPal, which effectively shut down her ability to make money for months, Carpio decided to explore Bitcoin as a permanent payment solution for her hemp business. Using Mycelium to process her transactions, she was easily able to integrate Bitcoin into her shop’s infrastructure.
And the benefits of Bitcoin are far reaching:
- It’s a system that doesn’t judge businesses by their operations.
- It’s available 24/7 without a government, corporation or boardroom controlling or monitoring the transactions.
- It allows cannabusinesses to process credit and debit cards without a bank account.
Though that doesn’t mean Bitcoin is without problems. One concern for Bitcoin users is the extremely volatile market. According to BLX, over the month of April, the price of Bitcoin varied from as low as $1124 to as high as $1600. There’s also confusion about how it works.
“The biggest pushback from hemp farmers is just the lack of understanding,” Carpio told Motherboard. “This is the older generation that doesn’t really get it. They have this notion that Bitcoin is illegal, imaginary and doesn’t really work.”
Still, Bitcoin holds the potential to deliver the marijuana industry out of its current cash-only state. Recently, First Bitcoin Capital Corp announced a merchant processing agreement for the states of California and Oregon, including the ability to process credit cards. And two startups are taking Bitcoin mainstream for the cannabis industry.
Cannabis-Friendly Bitcoin Startups
POSaBIT, a square-based fintech startup, is using Bitcoin to circumvent the problem of cash by allowing customers to buy Bitcoin directly at the point-of-sale with a debit or credit card, and then to immediately use their Bitcoin to make a cannabis purchase. The company’s CEO and co-founder, Ryan Hamlin, has dubbed his service as the “Bitcoin kiosk solution.”
“Federal laws prohibit using credit cards to purchase cannabis,” Hamlin told the Seattle Weekly. “That’s exactly what we’re not doing. POSaBIT gives consumers easy access to Bitcoin by allowing them to purchase Bitcoin during the retail experience. These wallets can be used to make purchases on the spot or anywhere that accepts Bitcoin such as Amazon.com.”
Another recently launched Bitcoin service comes from CannaSOS, an online strain database and cannabis-friendly social hub. They launched Perkscoins (PRC), a new virtual currency for the marijuana industry that function like reward points. CannaSOS members who contribute to the community earn Perkscoins for their efforts or they can purchase coins for use. The hope is that participating dispensaries will eventually use these digital coins in place of cash.
Thanks to these startups and enterprising cannabusiness owners, Bitcoin is becoming the peer-to-peer solution to the cannabis-banking problem.