Here’s How Bitcoin Is Helping The Cannabis Industry Solve Its Banking Crisis

By Carey Wedler

As the age of cannabis prohibition slowly comes to an end — despite the best efforts of drug warriors like Attorney General Jeff Sessions — there is an increasing degree of accountability and transparency in the emerging industry. The more states legalize and decriminalize the plant, the more it makes its way out of the shadowy black market and into a more professional, retail setting as retailers and growers face more scrutiny and higher standards.

But even as states legalize cannabis and consumers are increasingly offered safer settings and more product variety, the industry is still struggling as a result of the federal government’s continued tirade against the substance. This is clear in its ongoing police attacks on cannabis operations — even in states where it’s legal. But anti-drug laws are also causing headaches for the industry another way: they’re making it nearly impossible for members of the industry to safely conduct financial transactions.

Because cannabis remains a Schedule I drug under federal law, financial institutions have long shied away from allowing marijuana businesses to use their services. As a result, those working in the cannabis industry are largely forced to conduct their transactions in cash, which is not only inconvenient for both the merchant and the consumer, but also a safety risk; they must hoard large sums of cash rather than being able to deposit their profits in a safe account. The Los Angeles Times has reported that 70 percent of cannabis businesses have no bank accounts.

As a result, Bloomberg reports, participants in the cannabis market are coming up with solutions to this problem. The outlet reports that “[l]egal cannabis was a $6 billion industry last year and is expected to grow to $50 billion by 2026, according to Cowen & Co,” and as a result, at least two cryptocurrency startups are stepping in to help process those profits.

Bloomberg explains:

Enter bitcoin, the cryptocurrency that consists of digital coins ‘mined’ by computers solving increasingly complex math problems. At least two financial-technology startups, POSaBIT and SinglePoint Inc., use the cryptocurrency as an intermediate step that lets pot connoisseurs use their bank-issued credit cards to buy weed.

POSaBIT operates by installing kiosks in cannabis shops that allow customers to purchase digital currency with their credit cards (with a two dollar transaction fee added on). That purchased currency can then be applied in the store.

John Baugher, co-founder of POSaBIT, argues the technology is vital.

“There’s no industry — whether it’s the production and sale of cannabis or the production and sale of a cup of coffee — that can operate safely, transparently or effectively without access to banks or other financial institutions and traditional services,” he says.

“That’s where we thought we could leverage the use of digital currency.”

Trove Cannabis, a high-volume shop in Washington that conducts 3,000 transactions per week, started using POSaBIT after spending six months on a waiting list. According to Yin-Ho Lai, the company’s CEO, 13 percent of their customers have since chosen to pay with credit or debit cards and tend to spend more when they use that form of payment.

Consumers also have the option to keep the digital currency they buy and spend it elsewhere.

Though this new development represents the innovation of the market, POSaBIT is still complying with federal and state standards. The consumer buying the digital currency must have a valid ID “that is scanned, encrypted and stored.” They can purchase no more than $150. Further, POSaBIT has a nine-point fraud detection system.

POSaBIT is not the only company coming up with solutions to the government’s impositions on the cannabis trade. “SinglePoint, a mobile-tech firm that specializes in payments via text message, signed an agreement last week with First Bitcoin Capital Corp. to develop a solution for cannabis and other high-risk industries without access to traditional banking,” Bloomberg notes.

SinglePoint put terminals in Washington-based shops two years ago, but banks shut them down, citing too much risk. Now that cryptocurrency is becoming increasingly mainstream, however, there is hope. “It’s not foreign to them now, like some sort of weird scam that they don’t know about,” says Greg Lambrecht, founder and CEO. “More and more establishments are accepting it, but it’s kind of like the wild, wild west.”

Nevertheless, one prevailing view from industry insiders is that by the time these cryptocurrency options are widespread, traditional banks will be more willing to accept cash from the cannabis industry as the plant continues to move into the mainstream. In the meantime, however, the technology will continue to improve the quality of the ever-profitable and burgeoning business.

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After Legalizing Cannabis, Unemployment In Colorado Lower Than Rest of Country

By Carey Wedler

Three years after legalizing cannabis, Colorado has the lowest unemployment rate in the country. “While the national unemployment rate dropped to 4.3 percent in May, the lowest since 2001, Colorado’s jobless rate is the nation’s lowest at 2.3 percent,” CNBC reported Monday.

According to Governor John Hickenlooper, multiple factors have contributed to Colorado’s job growth, including the state’s business-friendly policies. He touts the state’s very low business tax rate, noting Colorado has “one of the lowest business income tax levels at just a little over 4.6 percent.”

This approach has helped create over 60,000 jobs in the clean energy sector, a fact that should please both business and environmental advocates. One of the main factors in Colorado’s successful economy, however, is undeniably the cannabis industry.

Last year, cannabis generated $1.3 billion in profit, which yielded nearly $200 million in tax revenue that the state is using for various programs, including education, substance abuse and cannabis awareness programs for youth, and even the Attorney General’s office.

Further, with over a billion dollars in business, jobs undoubtedly follow.

In 2015, alone, the state’s cannabis industry created 18,000 new full-time jobs. As the Washington Post reported:

These indirect impacts of marijuana legalization came from increased demand on local goods and services: growers rent warehouse space and purchase sophisticating lighting and irrigation equipment, for instance. Marijuana retailers similarly rely on other companies, like contractors, lawyers and book-keeping services, to conduct their own businesses.

That growth has continued. In July of last year, CBS reported that according to the Marijuana Business Daily, “Colorado now has 27,000 occupational licensees, up from about 16,000 at the end of 2014, according to the Colorado Department of Revenue.”

Though clean energy jobs currently outnumber on-the-record cannabis jobs by roughly 35,000, the speed of job creation appears far quicker with weed. According to the Denver Business Journal, for example, the clean energy sector created 1,583 new jobs in 2014. By comparison, the Marijuana Business Daily reported in May of 2014 that less than six months after legalization, the cannabis industry had already generated between 1,000 and 2,000 new jobs — roughly the same number of jobs as clean energy created in the course of the whole year.

Further, according to a 2016 Clean Jobs Colorado report by the organization Environmental Entrepreneurs, Colorado already had 62,000 clean energy jobs in 2015 — roughly where it rests now — making that industry’s growth apparently slower than the 18,000 new cannabis-related jobs the Post reported for the same year (it’s important to note, however, that some of these jobs already existed but were part of the black market and were counted as “new” when the industry was legalized).

This is promising news not just for Colorado, but the broader market. “Cannabis-related companies now employ an estimated 100,000 to 150,000 full and part-time workers, according to a new report by Marijuana Business Daily,” CBS noted last year.

As Business Insider pointed out in March, “California, home to the world’s sixth largest economy, fully legalized marijuana last November. Its state capital region alone could see 20,000 jobs created if it becomes a hub for the industry.”

According to a report from the New Data Frontier, which focuses on cannabis industry data, there could be as many as 283,000 jobs in cannabis by 2020. Business Insider points out that this figure will outpace the manufacturing industry, which is expected to lose 814,000 jobs by 2024.

In Colorado, where Governor Hickenlooper initially opposed legalization but changed his mind when he saw the positive results, there are yet to be serious negative consequences. Though Hickenlooper told CNBC it’s still “too soon to know” what the downsides may be, he remained optimistic. “We don’t see more people doing more marijuana in Colorado after legalization. It’s through a regulated process now,” he said.

But we haven’t seen a big spike in teenage consumption, we haven’t seen a big spike in any consumption.

It appears the only spike so far has been in jobs, coupled with other forward-thinking developments like the growth of the clean energy sector and the freedom for businesses to thrive.