You wouldn’t think marijuana has any connection to cryptocurrency and the complex blockchain technology that authenticates and records transactions. The former is a psychoactive plant that has been associated with racial injustices for decades and is now touted for its medical potential while the latter is an online decentralized currency that has taken the world by storm in recent years.
However, a deeper look reveals ways in which the two emerging industries are compatible. Since federal law still considers cannabis to be a Schedule I drug, cannabis industry actors have a hard time accessing basic financial services. Most times, they are forced to operate on a cash-only basis, which puts them at risk of robberies and makes financial tracking and tax compliance difficult.
Cryptocurrencies such as Bitcoin and Ethereum could allow the industry to access much-needed financial and accounting services. According to Mark Lozzi, founder and CEO of a marijuana financial services company called Conifa, a stable coin that’s capable of weathering the industry’s volatility would best serve the cannabis industry.
Such a stable coin would be used for consumer payments and business-to-business transactions. Consumer payments would be a relatively easy way to introduce this stable coin into the state-legal cannabis industry, says Lozzi. Allowing customers to purchase cannabis using cryptocurrency would increase their purchasing power while ensuring the industry is on par with modern-day innovations and interests.
On the other end of the spectrum, cryptocurrency and blockchain technology could be used to build a completely “immutable and auditable” banking infrastructure for cannabis growers, processors and retailers, Lozzi says. Blockchain would also make it possible to build a financial system capable of tracking cash and products. The cannabis industry is desperately in need of a centralized framework for oversight and compliance, and blockchain technology has the potential to fill this gap.
Lozzi acknowledges that the SAFE Banking Act, which will prohibit federal regulators from penalizing financial institutions that provide banking services to state-legal cannabis businesses and ancillary businesses, may soon become law and increase the industry’s access to financial services. Still, cryptocurrency payments could coexist alongside regular currency due to their speed and flexibility.
Furthermore, blockchain technology can still support oversight and compliance in the industry as it provides auditability and immutability, Lozzi says. He notes that blockchain solutions should be used within a strong and compliant infrastructure to ensure that they track the flow of money in compliance with industry requirements and guidelines.
With the cryptocurrency market currently seeing a major decline in value, Lizzo believes the winner will emerge as a stable coin.
The cannabis industry and its leading players such as American Cannabis Partners would appreciate all available payment options given the challenging regulatory environment in which they operate, so alternatives such as using cryptos wouldn’t be such a bad idea for the industry.
NOTE TO INVESTORS: The latest news and updates relating to American Cannabis Partners are available in the company’s newsroom at https://cnw.fm/ACP
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