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The Difficulties of Banking in the Cannabis Industry

November 28, 2017

Banking and lines of credit for the cannabis industry has been, and continues to be a huge problem. Generally, federally regulated banks are not willing to give bank accounts to cannabis companies due to cannabis being federally illegal. There is a high risk of these institutions getting targeted for money laundering and other drug related laws if they do allow cannabis companies to have bank accounts. It is hard to fault the banks, because the fault really lies with the federal government. Congressman Ed Perlmutter tried to solve this problem at a meeting with the House Financial Services Committee by offering an amendment that would prevent the federal government from punishing banks working with the cannabis industry. However, the amendment was blocked by other committee members before it could be voted on. This is a problem that the government is going to have to resolve sooner rather than later. More and more states are allowing cannabis companies to operate within its boundaries, but the federal government has yet to align the federal laws with this change in social climate. 

 

Because these two do not align yet, public safety is put at risk. Cannabis businesses because of the federal laws are mainly cash based businesses. However, these companies have no where to put the cash because federally regulated banks aren't willing to give these companies bank accounts. This causes the companies to have massive amounts of cash stored away making them perfect targets for larceny. Congressman Perlmutter has referred to a case in which an Iraq War veteran was killed during a robbery while working a security detail at a cannabis retailer. Cannabis companies have to store this cash somehow, and the options are not good. Generally, owners choose to put the cash in a storehouse that is guarded by some kind of security. Others will actually bury the money underground and unearth it as needed. Clearly these are non-optimal solutions.

 

Luckily, others are trying to create solutions to this problem. Michael Wagner is the founder of Tokes, a cryptocurrency company that specializes in the legalized cannabis industry. Tokes is a company that allows customers to connect their bank account to a regulated currency exchange, which in turn allows you to buy cryptocurrency. Then you exchange the cryptocurrency and buy Tokes. It is a smart solution, but is currently only being used by one dispensary in Nevada. Another solution that is more widely talked about is the idea of  public banks. There is currently only one public bank in the U.S. and that is the state-owned Bank of North Dakota. It was originally created for small businesses and farmers who felt they were getting unfair treatment from commercial banks. The North Dakota Department of Financial Institutions oversees the bank, not the federal bank examiners. So there is a precedent for public banks, but this solution is not problem free itself. One big problem is that setting up these kinds of public institutions will take a lot of time. Another problem is that the public bank would still have to obtain a master account from one of the twelve federal reserve banks.

 

While people are trying to find solutions around the banking problem, they are still far from being implemented. The best and quickest solution for this problem is some kind of federal legislature. Whether it would remove cannabis from a schedule one drug, or amendments that do not punish the banking industry from servicing the cannabis industry changes are needed. 

 

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