Can Crypto Solve the US Cannabis Industry’s Banking Problems?

Cannabis, meet Crypto

The US cannabis industry, estimated to be worth around $40 billion by 2030, faces legal and regulatory challenges, including a lack of access to traditional banking and supply chain transparency. Can crypto help?

The utility of blockchain technology to address data mutability, trust, authenticity and asset traceability may be the ideal solution to these challenges facing the cannabis industry.

Under US federal law, marijuana remains a Schedule 1 controlled substance, creating both financial and operational obstacles for state law-abiding operators in the expanding cannabis landscape.

Federal Reserve-backed traditional banks continue to close their doors to state-licensed cannabis companies, unwilling to touch funds that have passed through operations that are still technically illegal under federal law. Cannabis startups deal with higher risks associated with cash operations. Moreover, they do not have access to traditional bank loans to build up their businesses. Smaller credit unions have sprung up — followed by long waiting lists — but now that the SAFE Banking Act was removed from Congress’s annual defense spending bill, any hope of immediate progress on the national horizon has been dashed.

On the transparency front, legal cannabis consumers still do not know where the products come from, how they are produced and who grows them.

Here are a few real-world use cases for leveraging blockchain and crypto for the cannabis industry, aside from marijuana-based cryptocurrencies that have been around since 2014, such as PotCoin, CannabisCoin, DopeCoin, HempCoin, and CannaCoin.

Global Cannabis Capital for Investment

Luxembourg-based company Global Cannabis Capital (GCC), which has operations in Latin America, is the first tokenized cannabis ecosystem to issue security tokens to raise investment.

Token offerings could expand the funding sources available to the pot industry, which cannot borrow money from banks due to the US federal government’s ban on marijuana. Funding so far has come mainly from venture capital, wealthy individuals and individual shareholders rather than institutional investors.

Last year, GCC’s incubator unit, Cannabis Company Builder, raised $500,000 in seed capital from investors, including pharmaceutical company and delivery app entrepreneur Ruben Sosenke.

CEND for transparency

Another illustration is a Polygon blockchain company called Cannabis Without Borders (CEND) that is creating a transparent, end-to-end solution for buyers and sellers of both medical and adult cannabis. The crypto company currently works with 30+ countries across North America, Europe, Latin America and the Asia-Pacific region.

CEND sources, certifies and delivers cannabis products securely to connect growers, producers and consumers across the legal global cannabis market. The service also facilitates production in the country and regulatory support and uses government and industry relations, optimized systems and adapted blockchain technology.

“We wanted to create a streamlined way to move cannabis product as a commodity, like you see with any other commodity out there, where everyone knows exactly what’s going on,” CEND CEO Erik Holling told Cannabis Wealth.

Such blockchain services can be used to track and trace cannabis products across the entire life cycle of the products and will be able to detect fraud. Additional data available to consumers may include what lighting has been used, how the plants are growing, cleanliness of facilities and more.

Speaking about regulatory issues, Holling said: “At the end of the day, transparency is what makes politicians feel more confident about promoting the industry in their countries. It allows banks and insurance companies to feel more confident.”