Is Bitcoin for weed the answer to banking problems?
The growing popularity of “virtual currencies” like BitCoin could offer a creative solution to cannabis banking. But before BitCoin can revolutionize how the marijuana industry does business, it’ll have to clear a few significant hurdles, first.
Hilary Bricken is a Seattle attorney who chairs her law firm’s Canna Law Group. She and the other lawyers on her team have extensive experience representing the legal cannabis industry. Bricken is an expert on the business end of things and is one of the 100 most influential people in the cannabis industry.
Bricken keeps track of developments in the cannabis industry on the Canna Law Blog, which she edits. One of her latest screeds tackles one of the biggest problems plaguing the pot industry.
Since the federal government still prohibits marijuana, cannabis businesses have real issues using banks to handle their cash. The issue is a well-documented problem, but no one seems to have any bright ideas about how to solve it.
How would BitCoin for cannabis work?
BitCoin is a virtual currency or “cryptocurrency” which isn’t backed by any nation or bank. In reality, virtual currency has value only because the people who use it believe it does.
In other words, transactions between individuals take place directly. Without an intermediary, virtual currencies are “decentralized,” which makes it tough to identify who owns BitCoins and who’s trading them.
Therefore, cryptocurrencies are valuable for the cannabis industry. People can buy and sell marijuana without the need for a bank. Thus, BitCoin offers a kind of virtual loophole for getting around the federal law.
So in places where marijuana has been legal for a while, like Washington, cannabis merchants are already using BitCoin. But virtual currency traders can run up against a brick wall trying to convert the currency back to cold hard cash.
To do that, you have to find someone willing to make the trade, BitCoins for money. And that is the original problem with BitCoins everyone is trying to solve. Otherwise, BitCoin trading starts to look real illegal, real fast.
States Cracking Down On BitCoin For Marijuana
Cryptocurrencies are a major conversation topic for those in the cannabis biz. In fact, the official “Crypto Cannabis Conference” is about to have its third annual meeting. Marijuana industry entrepreneurs are eager to try out BitCoin, which has the largest market share before states start cracking down on it.
As Bricken explains, from a law enforcement perspective cryptocurrency is the tool-of-choice for all kinds of black market, shady dealings.
Mostly, BitCoin has already earned a reputation as the currency of the illegal narcotics trade. The Silk Road website, for example, has played a huge role in attracting law enforcement’s attention.
Furthermore, according to Bricken, using BitCoin for legal cannabis presents a “logistical nightmare” for the cannabis business. It’s a question of volume.
For it to work as a currency for weed, enough people have to “buy into” it, trading their real cash for virtual currency that’s hard to turn back into cash. Most people just aren’t very into taking that risk.
Besides, states are already taking steps to ban the use of virtual or cryptocurrencies for use in the legal cannabis market. If those bans go into effect in Washington, for example, it will likely set the trend in other weed-legal states.
Making BitCoin For Weed The Solution To The Banking Problem
Despite the risks, some are remaining optimistic about the possibility of solving the cannabis banking problem with BitCoin. Contrary to the law enforcement opinion that cryptocurrency is untraceable “dark money” that’s too easy to use illegally, some are saying that states just don’t understand how BitCoin works.
Two BitCoin pioneers, Ryan Hamlin and Jon Baugher, founders of a payment product called POSaBIT, argue that virtual currencies can be fully transparent. Tweaking the system a bit would allow state agencies to audit, verify, and trace all transactions. If they can figure that out, then BitCoin absolutely could revolutionize the way the cannabis industry does business.