There is a cannabis boom going on in the U.S. as states continue to legalize marijuana. Yet although there is big money at play, the banking and financial industry hasn’t been able to help the industry move beyond cash.
Nationwide, legal retail marijuana sales were over $8.5 billion in 2018 and are expected to have topped $11 billion in 2019. And in California, the cannabis industry is worth $3.1 billion dollars.
But since cannabis is still illegal under federal law, banks, many of which are federally chartered, do not allow companies in the cannabis space to have bank accounts. That means most payments are made in cash, which in turn undermines the compliance laws they are supposed to follow. In addition, those businesses struggling for cash can’t declare bankruptcy under Chapter 11 because of those same federal laws.
Last year, a bill called the Secure and Fair Enforcement (SAFE) Banking Act, which would offer safe harbor to financial institutions doing business with legal pot operations, was passed by the House of Representatives. However, there is no guarantee that it will get through the Senate.
There has been some progress. Rodney Hood, chairman of the National Credit Union Administration, has said the agency will not punish credit unions working with those companies in states where the substance is legal. In addition, GFA Federal Credit Union in New Hampshire has given access to a range of financial products to the state’s five licensed alternative treatment centers, which operate as medical marijuana dispensaries.
“We’ve built a turnkey banking solution for cannabis businesses,” GFA CEO Tina Sbrega told the site. “We’ve formed partnerships with other third-party providers to be able to bring similar solutions to cannabis operators that we would for any other business.”
In the meantime, a Forbes report pointed out that this is the perfect opportunity for FinTechs to develop solutions in both payments and compliance that will enable cannabis companies to “manage their finances and operations in order to keep growing sustainably.” Some of the companies already with products allowed to utilize tracking and taxation in various states include Metrc, BioTrack (owned by HELIX) and MJ Freeway (owned by Akerna), while POS providers such as Flowhub, Green Bits and Treez are already sitting on many retailers’ registers.
