Cannabis Needs Crypto to Usher its Gray Market Into The 21st Century

June 8, 2019 07:33 UTC

By CCN: People have long anticipated the legalization of marijuana, long before ‘crypto’ became a buzzword. Over 25 states currently have some form of legalization, with several already moving onto full recreational legalization. A similar process played out during the end of alcohol prohibition in the United States.

States, one by one, made alcohol legal again. Eventually, a constitutional amendment was recirculated, but by the time it passed, most residents had some legal access to alcohol yet again.

Individual jurisdictions were still allowed to restrict the sale and possession of alcohol, and that persists today.

Legalization Has Down Sides

While that seems to be the trend society is following with marijuana, a crucial difference exists today: banking regulations prohibit illegal proceeds. Technically, federal law still classifies marijuana as a dangerous narcotic.

Therefore federally regulated and established banks – most of them – cannot offer accounts to companies that engage in that industry, even if they’re legal where they operate. Banks that did so knowingly would be conspiring in a criminal enterprise. That’s a bad look, no matter who you are, but it’s especially harmful if you’re entrusted with all kinds of money. The last thing you need is a fight with the government in that position.

Which raises the case for cryptocurrency. Dispensaries, which do billions in revenue per year, would be safer storing the majority of their coin in crypto. The solution for many of them might be to host a Bitcoin ATM, and at the end of every day, instead of run the funds to some bank or safe; they vault the majority of it up into crypto.

The cannabis industry is more mainstream than ever with legalization in a number of territories. | Source: Shutterstock

Then it merely needs to be secured on a USB stick. Businesses with the proper funds and an existing relationship with security will understand how easy and relatively inexpensive it would be to operate a side business in crypto. You could accept crypto and cash, always get most of it into crypto, and then also get a percentage anytime someone uses the ATM to buy crypto – often to spend it with you.

To incentivize that, you offer a small discount for using crypto. The discount should be lower than the amount you earn on their spending. Then you’re not losing much, and you’re also saving a fee at the end of the day when you spend all the money buying crypto.

Many other things become possible. Imagine a marijuana vending machine which accepts privacy coins. In Oregon, dispensaries aren’t even allowed to keep customer information. Using Monero makes it like the transaction happened with anonymous cash.

Marijuana: Bitcoin’s Natural Disruption Engine

Cryptocurrency has an obvious confluence with the marijuana industry, which is only just growing into its own as a legalized enterprise. Just as the Silk Road once gave Bitcoin its first utility, a similar phenomenon could happen with the gray market marijuana industry. The industry could provide real service. Within the non-product sections of the industry, like providers of herbicides and things, accepting Bitcoin could greatly help their customers, who are likely to move deeper and deeper into cryptocurrency.

All of which provides a constant demand for whatever cryptocurrency is preferred. The likely case is that several cryptos will emerge as useful in the industry, with one or another leading the charge, like Bitcoin or another top 5 crypto. When industry players are looking to make significant, cross-border transactions, taking a big bag of cash will no longer be the only option. They can buy crypto and send it instead.

The apparent harmony of the two industries would likely float prices even when markets seemed to slump, with consistent demand from several parties.

So, what’s missing? What’s preventing this distinct growth pattern from emerging?

Technically, nothing.

However, what’s probably missing is an effective and targeted information campaign, aimed at bringing people in the marijuana industry up to speed on what crypto can do for them.

This article was edited by Samburaj Das.

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P. H. Madore has written for CCN since 2014. Please send breaking news tips or requests for investigation to bitillionaire+phm@gmail.com. He lives in Maine, USA. A single father of four young children, he does not discourage financial donations, provided they do not come with strings attached.