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Cryptocurrency:

A Cure for Cannabis Companies

Marijuana has been a hot topic in America since President Nixon declared a “war on drugs” in 1971. This was only about a year after marijuana was classified as a schedule 1 drug, which is defined as a drug that has “no currently accepted medical use and a high potential for abuse.” Thankfully, the United States is slowly working towards the legalization and/or decriminalization of marijuana. 39 states have legalized the medical use for marijuana, and 21 states have legalized recreational use for adults. This, in turn, has allowed marijuana-based businesses to start springing up.

While weed is heavily taxed, states, such as Colorado, who were among the first to legalize weed have seen huge financial benefits. One of the biggest issues with the brick-and-mortar weed shops is that weed is still federally illegal. This means that banks are either unable to conduct business with cannabis companies, or in many cases, they are simply unwilling. For anyone who has visited one of these stores, you may have noticed that they only deal in cash. Not only is this inconvenient for both the business and the consumer, but it also means they are more likely to be targeted by criminals.

With midterm elections having just passed, Democrats now hold the senate and Republicans hold the house. Historically, liberal Democrats have been the ones pushing for legalization, while the more conservative Republicans have fought to keep weed criminalized. The reason often given is the drugs schedule I classification. Many countries have either legalized or decriminalized marijuana and can be used as examples for potential outcomes of countries that are still hesitant to follow suit. The difference being, as long as you are not causing an issue, nobody is bothered by what you consume.

Cannabis is often treated similarly to alcohol. There are age restrictions, regulations on when and where you can consume cannabis, how much a person can possess, etc. These rules and regulations help govern the buying, selling, and use of marijuana, while still providing consequences for operating outside of these boundaries. Decriminalization also means that should you find yourself on the wrong side of the law, consequences can be more severe if weed is involved.

Decriminalization and regulations seem to be excellent starting points for America. With the concern of how to punish offenders established, some may wonder what, if any, benefits marijuana may provide that would cause so much division between political parties. Side effects can range from happiness, hunger, and drowsiness to paranoia, forgetfulness, and more. Compared to a socially similar, but federally legal substance like alcohol, weed sounds like a far more enjoyable experience.

One of the biggest issues and most contradictory, is that cannabis is currently still a schedule I drug, which, by definition, means that it has no medicinal value. However, 37 states in the US have legalized the use of marijuana for medical use. In fact, one study by the National Library of Medicine found that, out of 100 patients surveyed who were re-applying for their medical cannabis certification, 97 reported using cannabis for chronic-pain relief. The average pre-treatment (i.e., the use of cannabis) pain levels were 7.8 on average, while post-treatment pain was an average of 2.8. That means that there was a 64% decrease in pain overall. This is before covering the relief many patients find from stress and anxiety, depression, loss of appetite, insomnia, and more. It is due to this scheduling, though, that has caused so many issues with legalizing cannabis for both recreational and medical use.

Because of marijuana’s schedule I classification, banks are often reluctant or will directly refuse to open accounts for cannabis businesses, despite the businesses operating legally under state law. This can be a difficult hurdle for a business, as this removes the option to use credit cards and other means of payment, instead being fully reliant on cash transactions. The Federal Reserve Bank of San Francisco has seen a continuous decrease in cash being used, from 31% of all transactions in 2016 to 20% in 2021. How is a company supposed to survive, let alone thrive and grow, when they have been forced into stringent financial regulations, which continue to show a downward trend? That is where cryptocurrency comes in.

Cryptocurrency is a highly encrypted digital currency. One major benefit of crypto, is that it does not operate under a government or bank, known as a centralized network. Instead, they exist as a decentralized, digital currency built upon blockchains. Since these types of currencies work outside of government agencies, they do not fear the same repercussions from the federal government regarding the cannabis industry. Bitcoin, one of the most well-known cryptocurrencies, was created in 2009. Cryptocurrencies provide a means for person-to-person transactions, without the need for a third-party, like a bank. Banks charge transaction fees, some as high as $35, and can take days or even weeks for these transactions to process. While some cryptocurrencies do charge transaction fees, Nano.org shows that even among some of the most popular cryptocurrencies, that fee is more often than not a mere fraction of a dollar.

Considering all the fees that banks charge, it’s a wonder they are not more eager to try and work with cannabis companies, to include fighting for the federal legalization of cannabis. A survey by Money Rates shows that the average monthly fee for “maintenance”, which is to say, to keep your account open, is a little over $12, while ATM fees are around $1.30 and overdraft fees are at nearly $30 on average. Most cannabis shops have had to install ATMs to allow customers to withdraw cash for their transactions. This means that banks are still getting their cut, though far less than they could be. Cryptocurrency could and should be used as the primary alternative to the use of standard banks, especially for the heavily regulated cannabis industry.

Cryptocurrency would allow for safe and secure transactions, due to the nature of cryptos blockchains and decentralized model. The amount of money lost from both parties to a middleman like a bank would be nearly nonexistent as well. While the current cryptocurrency market is quite volatile, nearly all of the digital currencies are sitting relatively low, meaning this is one of the best times to invest, or to incorporate cryptocurrency in regard to the cannabis industry. Researching which coin to invest in can be challenging, as there are so many. The best place to start is to check the tickers and trends of each, then follow the standard “buy low, sell high” methodology of the stock market. Bitcoin, Ethereum, and Binance are some of the most popular, and a great place to start. Despite its relatively new introduction to the global economy, the benefits of using cryptocurrency far outweigh the outdated use of traditional banks. Hopefully, the cannabis industry will increase the rate at which it is incorporating digital currency transactions, to the benefit of the producers and consumers alike.

 

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