What opportunities exist at the intersection of cannabis and blockchain technology? Let’s talk about what the future could hold for this intriguing team-up.
Despite the growing momentum of legalization crossing the country, the state of cannabis banking remains at a standstill. Traditional banks backed by the Federal Reserve continue to shut their doors to state-licensed cannabis companies, unwilling to touch funds that have passed through still federally-illegal hands.
In turn, struggling cannabis companies continue to deal with higher risks associated with all-cash operations. They still don’t have access to traditional bank loans to build their businesses. Smaller credit unions have emerged—followed by long waiting lists—but now that the SAFE Banking Act was removed from Congress’ annual defense spending bill, any hopes of widespread progress on the horizon have been dashed.
Many see promise in decentralized finance when it comes to the cannabis industry’s limited access to financial services. By utilizing cryptocurrencies, these highly-regulated companies can benefit from blockchain’s transparency and security, not to mention the ability to conduct transactions online. (Online payment processors will deny or add on exorbitant fees even for CBD/hemp companies that use their services).
There are arguments in favor of a cannabis-based coin like PotCoin (CRYPTO: $POT) or DopeCoin (CRYPTO: $DOPE) to serve as an industry currency, but none of these alternatives are close to the levels of circulation needed to be a viable option; it may take an Elon Musk-level celebrity to get enough attention on one of these coins before they could begin to make sense for cannabis transactions among producers, distributors, dispensaries, and consumers.
Some dispensaries are having a go at accepting mainstream coins like Bitcoin, Litecoin, or Bitcoin Cash for cannabis transactions in legalized states. All locations of The People’s Remedy throughout California accept cryptocurrency as payment. However, is it something consumers are demanding at dispensaries everywhere?
The volatility of a cryptocurrency’s value at any given moment is too risky for price-sensitive consumers. Cannabis companies still struggle to get consumers to take $20 grams seriously; they aren’t going to be happy to see that $20 gram ended up costing them double that day. They aren’t wild about triggering capital gains taxes when they pick up an eighth of flower, either.
This doesn’t preclude the use of other blockchain-powered properties, of course, as Crypto Cannabis Club seeks to demonstrate through the seamless incorporation of NFTs into its ecosystem. But much of crypto tech’s implementation into the cannabis industry today feels more experimental than standardized, especially as it relates to finance.
Beyond the volatility, critics additionally point out that the sheer commitment regarding time and collaboration required for blockchain to provide its intended benefits is unrealistic for this industry — at least as things stand.
In an article for Rolling Stone, Jessica Billingsley explains how a blockchain’s peer-reviewed transactions mean that for every sale, budtenders would have to wait for the transaction to be written onto the digital ledger, shared, and verified by another company. She additionally finds it hard to imagine cannabis tech companies agreeing to take on the costs of hosting each other’s data to make this whole system work.
Every day, cannabis companies from the beginning to the end of the supply chain are entering data into multiple databases, tracking systems, and lab logs. Security requirements rival the strictest of high-value retail establishments. Testing and pesticide regulations have higher standards than anything sold at local farmers’ markets. Despite all of this, licensed operators are continually working to legitimize themselves as worthy of the protection and support of state resources just like any other business.
Billingsley does see blockchain as a solution for streamlining cannabis regulatory procedures, from authentication to compliance and beyond. But expecting government agencies to adapt to the latest technologies is a high hope—an even higher notion than the idea of cannabis companies playing nice and paying to host each other’s data.
However, while we’re still in the very early stages of real conversations about integrating blockchain or cryptocurrency into the cannabis industry—and fairly unlikely in the immediate future—crazier, more unexpected things have happened.