In the US its certainly not a secret that despite the fact it is illegal on a federal level, many states have allowed it for medical usage of marijuana and many others have also passed laws for allowing recreational usage.
However because of the federal laws keeping it illegal, this has presented a problem for marijuana business owners operating legally within their state.
That problem of course is the issue of banking. Marijuana shops cannot accept credit cards, checks, or anything other than direct cash because banks are bound to federal laws not state laws. This creates not only a burden for marijuana businesses, but also a huge security risk with some shops going s o far as having hired security that stands at their doors during all hours of operation.
It also runs the risk of large amounts of cash being stored on hand by the business owners both at their places of business and in their homes. Even employee’s often find they can not get bank accounts, have bank accounts closed, and can not deposit earnings due to their employment by a marijuana company.
Many of these companies have now started to look to cryptocurrency and blockchain technology as the solution to these problems.
Specifically there are four primary area’s that marijuana based companies believe that cryptocurrency and blockchain can help.
- Cryptocurrency can help solve payment and banking issues
- Cryptocurrency and blockchain can help marijuana companies obtain loans.
- ICO’s can be used to raise funds for startup marijuana companies
- Blockchain can used for seed-to-sale tracking which is a requirement in legal marijuana markets in most states.
Not everyone however agree’s with this new industry of blockchain.
According to the president and co-founder of MJ-Freeway, Colorado based marijuana company:
it has applications for cannabis, and it’s a very interesting technology, but it has drawbacks and limitations
It seems she, and many others like her believe blockchain is over promising and under delivering, and the volatility of the cryptocurrency industry makes it not practical for day-to-day use – ESPECIALLY because the marijuana industry cannot work with banks to cash out their funds.
Advocates argue that the verification features of cryptocurrency making it so every transaction could be tracked – something cucrrently impossible in the industry because it is entirely a cash based industry and that because it is decentralized with immutable ledgers, its relatively impossible to hack when implemented correctly.
Several in the marijuana industry have already begun using the technology including:
- Emerald Health Therapeutics
- CannaChain Technologies
Even those in the banking industry have taken an interest with Citi, Goldman Sachs and J.P. Morgan joining in a $20 million Series A funding round for Axoni, which is a company developing blockchain solutions for financial institutions that may be able to tackle the legal issues with banks working with the marijuana industry.
The National Association of Cannabis Businesses has hired a company to develop blockchain based software designed to give its 25 members seed-to-sale and transaction tracking capabilities.
According to Joshua Laterman the CEO of The National Association of Cannabis Businesses:
Blockchain’s biggest value is that it gives marijuana businesses reliable evidence of their financial history.
Nothing about the future of blockchain is clear yet, but one thing seems clear – one of the best starting places for mainstream acceptance in this space are with industries that already have no ability to ability to work with the existing banking solution.