Digital currencies may solve some the legal cannabis industry’s woes by becoming an alternative to cash payments. Despite recent state-level ballot initiatives across the US that legalizes marijuana in one form or another, the drug still remains illegal at the federal level. While it’s unlikely the feds are going to go after legal cannabis dispensaries any time soon, the legal murkiness does create one serious problem.
Banks won’t deal with cannabis dispensaries.
Consider the ramifications. No banking means no payment processing, which means customers can’t use credit or debit cards to make purchases. According to a 2016 survey, 75 percent of customers prefer to pay with credit or debit cards, with only 11 percent preferring to pay with cash.
Unfortunately, dispensaries can’t give customers what they want - payment methods other than cash - because banks won’t do business with them. Consequently, the customer is inconvenienced and the merchant loses potential sales.
A lack of banking causes even more serious problems. Since the industry is forced to accept only cash for payments, marijuana dispensaries are an excellent target for robbers and thieves due to the large amount of cash they keep on premises.
There’s still a larger problem than that, which is perhaps the biggest of all: dispensaries have great difficulty paying their expenses. Utilities, tax assessors and vendors would much rather not be paid in cash, and some vendors may not even accept cash payments.
The cost of protecting large sums of cash is prohibitive. The need for armored cars, safes and guards depletes the bottom line. It’s been estimated that cash handling expenses can amount to 10-15 percent of sales.
Changes are coming
Seeing an opportunity to gain access to a $6.7 bln market, the digital currency Dash partnered with Alt Thirty Six in April 2017. The Dash network, through its decentralized self-funding mechanism, is paying the company $496,000 to integrate Dash as a payment option in the cannabis industry’s point of sale (POS) systems. The vendor also has skin in the game, having spent nearly $700,000 of their own money developing the POS platform.
As part of this arrangement, Dash will be the only digital currency offered by the point of sale platform. According to the budget proposal submitted to the Dash network:
“We have three major verticals identified and solidified reseller partnerships that will adopt the Alt Thirty Six + Dash payment solutions:
- Independent Software Vendors (ISV) – Music & celebrity apparel company (100+ online stores), online marketing automation partner (600+ clients), and more.
- Value Added Reseller (VAR) –IBM, Sirius Computer Solutions, Industry Specific point-of-sale (POS) Partners
- Ecommerce Retailers – Sirius Computer Solutions”
The vendor has been making monthly progress reports to the Dash community and work continues apace. The platform’s initial release is scheduled for December of this year.
The road to mainstream adoption of digital currency has to begin somewhere, and perhaps no other industry needs cryptocurrency as much as this one. Many have suggested that digital currencies could gain adoption by saving vendors money on credit card fees, and this is certainly possible. But such fees usually amount to no more than three percent.
With the legal marijuana industry, Dash has the potential to save merchants up to 15 percent, which would be a massive boon to their bottom line. Dash is suitable for point of sale use because of its InstantSend feature. Transactions sent via InstantSend are fully confirmed and irreversible in four seconds. Bitcoin transactions, by comparison, usually aren’t considered fully “settled” until six confirmations are received, which can take an hour or more.