Despite several discrepancies involving its legality and usability across states, the demand for cannabis is growing in the United States. See this – according to 2021 research done by Pew Research Center, 91% of adults in the country want marijuana to be legalized – 60% for medical and recreational + 31% for medical use only. Here are a few more encouraging statistics – cannabis sales in the country may touch $57 billion by 2030. But it could even increase to $72 billion if the rest of the states decide to legalize it. However, businesses dealing with marijuana/cannabis are still struggling to deal with the most critical issue – access to banking. Reason – cannabis is illegal under federal law. This blog will look at how cryptocurrencies have emerged as a viable option for this rapidly growing industry.
Before we go deeper, let’s see how this niche industry looks as of 2022. As per the National Organization for the Reform of Marijuana Laws (NORML), 37 states and the District of Columbia in the U.S. have allowed using marijuana for medical purposes. Also, four other U.S. territories – including Puerto Rico, Guam, the Virgin Islands, and the Northern Mariana Islands- have done the same.
The banking dilemma
Now coming back to the core issue – why are cannabis businesses unable to work with banks? For the obvious reason mentioned above – it is still illegal under federal law. As most leading financial institutions are insured by the Federal Deposit Insurance Corporation (FDIC), federal rules restrict them from offering traditional financial services to cannabis companies. That’s why even legitimate cannabis business establishments can’t open bank accounts. And, not to mention this – it makes the industry a prime target for criminal elements for extortion and money laundering.
Here comes cryptocurrency
With banks not allowing credit and debit transactions for cannabis products, several cryptocurrencies have emerged as suitable options. Cryptocurrency is a virtual currency that has recently gained momentum as a medium of exchange. It leverages cryptography to help traders with secured and verified transactions. The entire crypto trade network is managed by blockchain technology.
The payment processing involving cryptocurrency is mainly facilitated by some of the leading cannabis delivery firms that oversee product delivery from a vast network of dispensaries. Acting as third-party service providers, these delivery companies allow dispensaries to accept payments in crypto while not implementing the required infrastructure. Here is how it works –
- Dispensary selects a crypto service provider
- The customer chooses crypto as a payment option
- The payment platform provides the crypto-equivalent value of the currency
- The customer makes the payment, and the same is sent to the dispensary
- The dispensary either chooses to store the amount in a crypto wallet or converts it into cash
It is clear that without banks, the cannabis industry is leaning on cryptocurrency for the much-required transparency and security. It can reduce the cannabis industry’s reliance on settling transactions using a massive amount of cash. As these firms can denominate more of their assets in cryptographically secured digital currencies, they can significantly reduce overhead costs involving securing and storing revenue.
By the way, have you heard about PoshCoin, the newest cannabis crypto coin that was launched last week? Apart from this crypto coin, we are about to launch our eCommerce platform so that you can buy all things cannabis.
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