This archive report was first published on 27 November 2019.
State of Flux ¶
November 27, 2019
With several states having legalized recreational marijuana, the cannabis industry is experiencing a cultural and economic shift. However, this shift also brings new challenges for tech-based companies, particularly financial institutions.
Under the Controlled Substances Act (CSA), marijuana remains a controlled substance at the federal level, making it a federal crime to possess, buy, or sell it outside of cannabis-friendly states. This lack of clarity has led banks to be reluctant to work with the marijuana industry, fearing they may break federal laws.
Mobile Payment Technology to the Rescue ¶
Mobile payment technology providers, such as Square and POSaBIT, are stepping in to fill the gap. These companies are offering blockchain-enabled payment processing systems that cater to the cannabis industry's unique needs.
Despite the FDA issuing warnings regarding CBD products, fintech companies are still in the initial stages of providing cannabis-focused services. In May, Square launched an invite-only program for a small number of CBD retailers to test out their new system.
The SAFE Banking Act: A Beacon of Hope ¶
The SAFE Banking Act aims to protect financial institutions while they do business with the cannabis industry. The bill ensures that state-legal cannabis businesses have the same access to banking as any other legal industry.
However, companies and banks still face the challenge of distinguishing between state and federal marijuana laws. The U.S. Department of Treasury has issued guidelines to help financial institutions navigate this complex issue.
Opportunities for Small Businesses ¶
As states and countries continue to decriminalize cannabis and its components, the industry is expected to be lucrative in the next few years. With federal decriminalization on the horizon, small business owners are boosting their marketing strategies to tap into this growing market.
The cannabis industry is still hyper-localized due to state limitations, but this untapped market presents opportunities for potential cannabis-based startup companies.
