Cannabis Changes the Banking System in America



Cannabis is still illegal under federal law, although the use of medicinal or recreational herbs is permitted in some states in the United States which puts some drug dealers in difficult situations. Especially for the marijuana sector, which started to live its golden age after it became legal in Colorado, there are directives on consumption and production on a state basis. Everyone opens marijuana greenhouses, and even politicians who leave politics are being thrown into this sector.



While everything is going so well, most of the cannabis sector investors who start earning thousands of dollars deal with banks that do not accept income from illicit weed consumption under federal law. The owners of the marijuana company hiding thousands of dollars under their pillows were very troubled. That is why the entrepreneurs in the cannabis industry wanted financial institutions to establish clear rules on what services the sector could provide.

The first step came from Colorado again. Politicians approved the first cannabis-themed banking system in the world, which they said would provide transparency and tighter control to the Colorado cannabis industry. Governor John Hickenlooper also signed the draft came to his desk. With this new banking system designed, all problems are eliminated. Because; banks are no longer able to reject the money of weed sellers in their safes because they see them as dangerous, on the contrary, they seem to open their doors to the end. Some banks have already started accepting drug dealers.

The First Cannabis Banking System


The US state of Colorado has allowed the marijuana industry to conduct banking transactions. For the first time in the world, the official financial system for the marijuana sector was developed. In the US state of Colorado, lawmakers have allowed a network of intermediaries to enable marijuana producers to benefit from basic banking services.



This move was made to save the marijuana sector from a market where only cash was returned. Prior to this arrangement, banks even opposed the basic banking transactions of marijuana producers. They were worried that marijuana was an illegal drug. This caused marijuana producers and marijuana sellers to carry excess cash and thus to suffer from theft.

Colorado, as of January 1, 2014, was the first US state to allow the purchase of marijuana for pleasure purposes, except for medical products. Washington will also allow the legal sale of marijuana as of June.

Banking Problems In The Cannabis Industry


Cannabis remains an illegal drug, meaning that cannabis companies do not have a legal banking system. Despite US laws, they are under federal investigation, accusing banks of money laundering. In 2016 alone, the cannabis industry is 7 billion. Today, in 2019, although more and more states are being legalized, federal status is forcing cash transactions. This makes it difficult to monitor commercial transactions. But this makes these companies easy targets for theft. This is an obstacle in a long list of risks in an industry that tries to erase the stigma associated with it.

The current theories are commercially focused to solve the problem. But you need to focus more on banking. One of the biggest problems in the banking system is the strict regulations of the federal government. It imposes itself on bank institutions in the fight against money laundering. Unreasonable banking arrangements do not only harm cannabis companies and other companies that interact with them. At the same time, they harm local, state and federal governments.



Cole Memo was established in 2013 by the Ministry of Justice to provide guidelines for cannabis enterprises to provide standards-compliant banking services where financial institutions are legal. However, these arrangements are complex. They want banks and other financial institutions to submit suspicious activity reports. These enable federal authorities to identify criminal organizations and their activities. This is an example of a regulation that is clearly useless for legal cannabis transactions. There are less than 30 financial institutions that clearly make the cannabis industry bank. No credit card network provides solutions for payment processing. Only a few banks and credit unions work with the cannabis industry.

The financial challenges of the industry are also related to corporate taxes. Beyond the money problem, the process of tax reporting for cannabis companies is like navigating through a dangerous maze. And bad paperwork can trigger an audit by the IRS. 280E is the law that does not allow any company to reduce the costs of smuggling in controlled substances that are illegal at the federal level, such as cannabis. Even though 46 states have enacted cannabis-refuting laws, according to certain parameters federal laws are still drug trafficking.

Although appropriate for the State Revenue Ministry, it is not safe or appropriate for business owners. This reduces the likelihood of reporting sales. For companies with questions or doubts about what they can reduce, it is best to contact a tax expert. There are things that cannabis companies can do to reduce the damage caused by the 280E, such as segmenting the company: S company.



In any case, as more and more countries legalize cannabis, we will probably see the end of some of these old laws and regulations. Other cannabis bills are regularly submitted to the US Congress. Some are interested in direct banking problems. Others, such as the State Act, do not specifically address financial issues. However, we are currently clarifying the drug trafficking laws that are causing the biggest problems. The industry is growing rapidly. Thus, the federal government is beginning to see that it can no longer ignore the cannabis banking problem.

Will Cannabis Banking Affect Canada?


The US draft to open the financial system for cannabis could be bad news for the cannabis sector in Canada. Some industry experts say the Canadian cannabis industry could lose its advantage if legislation that opens the US banking sector to cannabis companies is adopted. The Safe and Fair Practice (SAFE) Banking Act, which protects US banks working with cannabis companies against regulatory controls by regulators, will expire on March 26 before the Financial Services Assembly Committee.

This process, in which a parliamentary committee negotiates and changes the proposed legislation before voting for the version of the law to be submitted to Parliament, is one of the last steps in a campaign that will take years to engage cannabis companies to provide full access to financial services – from bank accounts to credit lines and credit cards.



When this happens, some Canadian cannabis companies are allegedly facing harsh competition from their American counterparts, which ultimately have access to large lines of financing and allow them to grow rapidly and fully benefit from domestic cannabis demand. American multi-state operators such as Acreage (Holdings Inc.) and Curaleaf are much larger than most Canadian cannabis companies. I don’t understand why American banks want to lend to most Canadian producers licensed for these multi-state operators. There is a lot of capacity on the American side, why did you borrow a small producer in Vancouver?

Currently, most US banks and credit unions do not provide banking services to cannabis companies or cannabis industry-related companies. For example, many companies may not even have a bank account and may pay their employees in cash.

What to Do with Money Earned from Cannabis?


Recreational cannabis use in Colorado became legal on January 1st. But companies operating in the sector cannot find a bank that will accept thousands of dollars they earn every day. The Obama administration issued a new guide and tried to convince the banks that there would be no lawsuit against those doing business with Colorado firms. But the banking sector has blocked this call. Don Childears, president of the Colorado Bankers Association, says he has advised banks to refuse cannabis money for fear of money laundering. But the sector is expected to grow to $ 10.2 billion by the end of 2019 and the question is: What are we going to do with all this money?

While cannabis for recreational purposes has been legal in Colorado only since the beginning of the year, the use of cannabis for medical purposes has been legal for more than a decade. During that period, banks generally worked with companies that do the cannabis business. One of these companies, Simply Pure, was able to do business with more than 400 dispensers in the US within a year. But when it came to a halt to suspend Wells Fargo’s bank account in 2012, everything came to a halt. Simply Pure had to be closed a month later.



Banks were not affected by the seemingly supportive stance of the Obama administration. They point out that the Ministry of Justice has issued four different regulations on banks and cannabis companies in the last two years. The problem is that banking laws and regulations are not dictated by the White House. Bankers are not afraid of violating laws designed to prevent money laundering, not only imprisonment but also the cancellation of banking licenses and harsh fines.

The cannabis sector is expected to become a thriving business area, but this has not yet happened. This is a billion-dollar sector a year. Colorado banks have a turnover of more than $ 100 billion per year. As long as Congress remains divided on this issue and the banks resist footsteps, the Colorado marijuana sector seems to be unable to level.

Fintech Solution for Illegal Cannabis Sales


The state of Hawaii, affiliated to the United States, has announced that it will switch to a cashless payment system in order to keep records of cannabis sales used for medical purposes. The Hawaiian government has taken action against abusers of medical cannabis abuse and trafficking in illicit drugs. According to a joint report by Hawaii’s health departments, a significant portion of the hemp production in the island state is being illegally deported. As a tool for the sale of drugs, Hawaii found the remedy for cashless payments to record the entire hemp trade.

Hawaii, which has taken a series of measures to prevent long-standing cannabis robberies and illegal sales, will ensure that sales are recorded end-to-end with cashless sales. Thus, for the first time in the world, the sale of cannabis products by a state will be realized without cash. Bloomberg reported that there are eight dispensers selling licensed cannabis in Hawaii and that all sales will be made by digital payment methods as of October 1st. Dispensaries will require patients to use the currently available mobile payment system called CanPay for the sale of cannabis.



Safe Harbor Private Banking will be held in partnership with the bank, the project will open special accounts for dispensaries in the state. All of the hemp sales will take place with the CanPay mobile application running on this opened bank account. So all transactions will be digitally recorded. Patients who do not have a smartphone will be able to register at the point of application within the patient in order to make transactions. The accounts, which will be created with an e-mail address and identification number, will be used in hospitals where there are tablets prepared only for this purpose.

Hawaii is also preparing to accept prepaid cards as an alternative for people without bank accounts. Helen Cho, the director of the Honolulu-based Aloha Green dispensary, said that if the patients did not have cashless payment technology, they would not refuse them and produce a solution within the dispensary. Becky Dansky, the chief lawyer of the Marijuana Policy Project, which strives to prevent illicit drug sales in the state, is still anxious, despite the fact that it positively produces cashless alternatives. According to Dansky, digital payment systems can provide certain security by ensuring that all transactions are recorded, but he still thinks he is vulnerable to hackers and cybercriminals.

Experts, on the other hand, are certain that credit card companies like Visa and Mastercard will not use their cards for the purchase and sale of cannabis products. Those who regulate banking laws may not want to be involved, even to record such sales. Therefore, Hawaii has to use its solution within its borders.

Cannabis Producer Tilray Began to Be Traded on Nasdaq


Canadian-based cannabis producer Tilray was opened to the public. The marijuana producer whose shares are sold in Nasdaq will now appear on Wall Street. Headquartered in Canada, the company produces cannabis used for medical purposes. The company has made a major move for the legal cannabis industry to take part in the mainstream finance world and has started trading in Nasdaq.



The Tilray initiative, which was offered to the public on US stock exchanges, took its place in Nasdaq with a starting price of 17 dollars. 32 percent of the company’s public offering of $ 153 million of funds obtained announced. Entering the weekend with a unit price of $ 22.39, the firm is thought to have a total market value of $ 2 billion.

  • Cannabis Manufacturers Open Doors

The Financial Times reported that both Nasdaq and the New York Stock Exchange were ready to accept shares of companies dealing with cannabis-related legal transactions in Canada. Matthew Kennedy, an IPO strategist at Renaissance Capital, said that the IPO process welcomed the approval process of the US stock exchanges and that an important step was taken to expand the cannabis industry.

With the hemp producer listed on the US stock exchanges, it was emphasized that it would be possible to reach large pools of capital and reach high levels of publicity. Tilray CEO Brendan Kennedy, told the Financial Times, 70 percent of the shares sold during the initial public offering, the US resident investors said. 18 percent of the shares were preferred by Canadians, while 12 percent went out of North America. Investors from cities such as London, Frankfurt and Hong Kong demanded shares.

Medical cannabis producer Canopy, which appeared on the Toronto stock exchanges, was listed in NYSE in May. Similarly, Cronos, also listed in Toronto, began trading in Nasdaq in February. Nasdaq is also home to the MTech Acquisition, known as a company that helps the cannabis industry.



  • Illegal Cannabis Sales Blocked by Fintech

The state of Hawaii, affiliated with the United States, has announced that it will switch to a cashless payment system in order to keep records of cannabis sales used for medical purposes. The Hawaiian government has taken action against abusers of medical cannabis abuse and trafficking in illicit drugs. According to a joint report by Hawaii’s health departments, a significant portion of the hemp production in the island state is being illegally deported. As a tool for the sale of drugs, Hawaii found the remedy for cashless payments to record the entire hemp trade.

Hawaii, which has taken a series of measures to prevent long-standing cannabis robberies and illegal sales, will ensure that sales are recorded end-to-end with cashless sales. Thus, for the first time in the world, the sale of cannabis products by a state will be realized without cash.

Within the scope of the project, which will be organized jointly with Safe Harbor Private Banking, special accounts will be opened for dispensaries in the state. All of the hemp sales will take place with the CanPay mobile application running on this opened bank account. So all transactions will be digitally recorded.

The Game Changer Cannabis Banking Reform Law Finally Come Into Force


In the last few years, the acceleration in the marijuana industry is almost unstoppable. In our north, Canada was the first industrialized country in the world to legalize recreation cannabis, open billions of dollars in additional sales annually and, more importantly, approve a sector tabooed by the business community. In our south, Mexico legalized medical marijuana in 2017 and following several Supreme Court judgments, it is considering progressing with a plan for ad legalization. According to Gallup, in 2005, only one-third of all Americans prefer to legalize cannabis.

In the United States, the world’s largest cannabis market on a nominal sale basis, cannabis continues to be an illicit drug at the federal level. In Layman’s words, this means that it is completely illegal, abusive, and not considered to have any medical benefit based on its classification. Of course, the federal government is relatively harmonious with state-level practice, but this has a number of other negative effects on this status.



For example, profitable cannabis-based businesses are subject to Section 280E of the US tax code. In 1982, businesses selling a federally illegal substance, primarily applied to the cocaine and heroin drug dealers, did not allow normal company business cuts to save on the cost of goods sold. For pot companies, the cost of goods sold tends to be a relatively small percentage of income, often leading to effective income tax rates that can approach 70% to 90%. In short, it is very difficult to hire and grow a cannabis business.

In addition, US pot businesses have little or no access to basic banking services. Although the Obama administration drew a loose set of regulations to enable banks to provide services such as loans to companies in the marijuana industry, the vast majority of banks have maintained their distances. In some cases, this makes cannabis companies completely dependent on money and cannot grow rapidly due to funding problems.

Occasionally, lawmakers have tried to combat marijuana banking reform, but have found a reception that their colleagues welcome. Senator Cory Gardner (R-Colo.) has repeatedly tried to add a marijuana banking reform change to the federal spending bill or the penal reform law, but either because of lack of support or by the Senate majority leader Mitch, he has been outcast. As a reminder, Republicans tend to see cannabis less favorably than Democrats or Independents.



However, long failures to pass the marijuana banking reform may soon end. As reported by Politico on Monday (February 4th), the House Financial Services Committee was scheduled to hold a hearing on the cannabis banking reform, which will be scheduled for February 13th. Politico mentioned sources familiar with the subject and claimed that nothing happened. In addition, the online publication Marijuana Momenti said that “preparations are still good for a full committee marking in the months on laws to clear the way hemp enterprises access banking services.”

If MPs continue the cannabis banking reform, it must change the game for a variety of reasons. The Democrats’ Assembly recaptured for the first time in eight years, and if they were more favorable than the Republicans to legalize cannabis, they would give their party a real opportunity to advance weed reform measures. It is not clear whether a marijuana banking reform measure has the chance to cross the Senate, but it will not support Mitch McConnell’s cannabis legalization, but it will still advance banking reform legislation as never before.

Savaş Ateş

I like cannabis. I read a lot about cannabis usage in the medical field. I researched a lot about planting it. I have started a cannabis business and i want to share my experiences with you.

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