In the United States, marijuana is a touchy subject but there is legalisation of medical marijuana in at least 25 states and the District of Columbia. This new medical marijuana industry has a dark secret though - it is a cash only business.
All Terms Cash
In July 2016, the Los Angeles Times covered the cash only nature of pot stores and how they are becoming victims of robberies.
They reported the killing of a 24-year old Colorado pot store guard, Travis Mason. Describing the amount of cash that is handled by these stores, the Los Angeles based newspaper wrote:
“Crime statistics concerning legal dispensaries are hard to come by as the industry expands, and, understandably, operators are reluctant to talk about how much cash they can have on hand. But in a late-night Seattle dispensary break-in last year, for example, thieves got away with $100,000 in cash.”
Why banks are not in love with the pot industry?
The one word answer to that question is - Feds. According to Governing.com, Federal law forbids banks and credit unions from taking ‘marijuana money.’
Describing the challenges faced by Colorado’s marijuana businesses, the website further states “All the cash floating around makes cannabis businesses targets for crime,” Freedman says. “Since Colorado fully legalized marijuana in January 2014, the Denver Police Department has logged over 200 burglaries at marijuana businesses, as well as shoplifting and other crimes.”
Cash only transactions are a headache
One of the fundamental problems is that businesses that work in the medical marijuana field can’t accept credit cards or write checks.
While at the state level, these businesses are legal, the federal laws classify cannabis as a Schedule 1 illegal drug.
It also means that a lot of these businesses end up paying their taxes in cash.
Of course all these drug taxes also means that the tax authorities in the US have to handle large amounts of cash as well for which they are largely unprepared.
In fact the Guardian described recently a unique problem that tax authorities in Sacramento, California are facing:
“The Sacramento branch of the California tax collection agency reeks of marijuana. That’s because it’s cash day at the collection center – when marijuana dispensary owners are allowed to bring in paper money to pay their quarterly sales tax bill – and the smell of their inventory clings to everything.”
Bitcoin can end America’s pot woes
Bitcoin and drugs have been in the news for all the wrong reasons.
The silkroad fiasco being the most well known of course. However, Bitcoin also holds the potential to deliver the medical marijuana businesses out of their current state of cash induced misery.
First Bitcoin Capital Corp, a Vancouver, Canada based company recently announced signing of merchant processing agent agreement for the states of California and Oregon. They will also be processing credit cards.
This agreement will open the doors of medical marijuana patients to pay with a credit card. Firstly, Bitcoin’s system will allow processing of credit and debit cards without the need of any bank accounts. Merryjane.com reported a spokesman from First Bitcoin Capital as saying, “Being the first publicly-traded cryptocurrency and Blockchain-centered company we want to provide our shareholders with diversified exposure to digital cryptocurrencies and Blockchain technologies.”
The cutting out of banks from the medical marijuana and credit card processing finally paves the way for both patients and marijuana companies to operate in relative safety.
However, the bigger picture remains that Bitcoin is now acting as a proper alternative to traditional banking and is providing services to the unbanked or to those that traditional banks wouldn’t even touch with the proverbial 10-foot long pole.