Let’s get right into it. Cannabis is currently federally illegal and is classified as a schedule I drug. That makes is it legally complicated for the cannabis industry to have proper banking solutions or payment options.
The cannabis industry is estimated to be worth $7.7 billion and is expected to grow to 31.4 billion by 2021, according to the Brightfield group. In one sense, there’s money to be made in marijuana, but the potential growth is limited. The industry needs additional investments and banking.
Jim Cramer, the host of “Mad Money’’, says that investing in marijuana is as speculative as investing in cryptocurrencies such as Bitcoin. Cramer told CNBC “As far as I’m concerned, there’s way too much speculation in this sector already.” We see his point… no one knows what is going to happen within the industry because the regulations keep changing. The government is having an identity crisis when is comes to cannabis. Are we for it or against it? Because of the lack of certainty surrounding both the crypto and cannabis markets, some investors consider the market too volatile.
One major issue with investing in marijuana companies or stocks is that there’s very little guarantee and a great deal of risk involved. In addition, many stocks are overinflated. The real problem is that at any moment, the federal government could jump in and cause quite a bit of trouble for the industry.
The reality is, “it is federally not legal to invest directly in marijuana companies,” Dan Ahrens, COO of AdvisorShares Investments and author of Investing in Vice told the Globe and Mail. And if the U.S. government so decides, investors “could be forced to divest from their illegal investments” without much warning—a concern for anyone focused on making more money.
Because of the lack of legality surrounding the industry, banking is a struggle. It is estimated that only 500 banks work with cannabis businesses and none of those are major branches. Cash is king in this business and because there is no way to accept credit or debit cards, cash is causing some problems. This is where crypto’s play a major role. Cryptocurrencies now offer the cannabis industry an alternative form of payment.
Crypto can offer dispensaries and growers a safer way to handle cannabis transactions. This way, operators can avoid having cash on hand and add another level of transparency for each sale.
“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value,” wrote Don and Alex Tapscott in their book, Blockchain Revolution.
The blockchain keeps the shared dataspace public and therefor it makes is easy to verify records of each cryptocurrency transaction.
So you are probably thinking ok… what does this mean for marijuana businesses? It means that by accepting a currency like Bitcoin or weedcoin instead of cash, they can track every transaction back to its source and ensure each payment is legitimate and theft-proof. There are less risks involved with blockchain versus a credit card. Since the banking problem keeps getting worse, many dispensaries are turning to crypto for a solution for their cash problems and relying on tech companies such as SinglePoint and First Bitcoin Capital Corp to provide the solution. The cannabis industry could be the first in fully embracing digital currencies.