Since January 1st, 2018, the distribution of recreational cannabis has been legal in the state of California, where the market is expected to reach $7.7 billion by 2022.
But this state legislation conflicts directly with federal law that categorizes marijuana as a schedule I drug.
As such, for fear of losing the federal authority to operate, banks won’t touch deposits from cannabis businesses. Meaning dispensaries are carrying up to $100,000 of cash at a time, making them targets for violent crime and police cash seizures.
Any initiatives for state support of cannabis-related banking have been stifled by fears of financial and legal consequences.
So, what are the dispensaries to do?
The answer might lie in cryptocurrency, which is showing increasing potential in mitigating the cash-related headaches of operating marijuana-based businesses.
Cultivating a Crypto-Garden
Cryptocurrencies are digital/virtual currencies that use cryptography for security. Most commonly, they are decentralized systems based on blockchain technology— a distributed ledger enforced by a varying network of computers
The biggest selling point of cryptocurrency, is that it’s not issued by any central authority, meaning it operates independent of and immune to government interference or manipulation.
One instance of cryptocurrencies making waves on the cannabis scene is PotCoin, which sprung up its own proprietary ATM at a dispensary in Colorado. It also has a market cap of approximately $4 million. While PotCoin has yet to fully carve its niche in the cannabis industry, it has embarked upon a promising partnership with WeedMD.
In fact, this partnership makes PotCoin the first cryptocurrency to partner with a federally licensed producer and distributor of medical cannabis.
Growing Investment Opportunities
Given licensing issues and the complex machinations involved in running a viable dispensary, it costs between $250,000 and $750,000 to get a cannabis business off the ground.
Thankfully, the Jumpstart Our Business Startup (JOBs) Act allows pot-based entrepreneurs to capitalize on crowdfunding initiatives like ICOs. What’s even better for small dispensaries is that something called Regulation A+ allows private businesses to raise up to $50 million from public investors.
High Times Holding Corp. recently backpedaled on a decision to take advantage of these rules. They would have been the first traditional stock offering to accept cryptocurrency investments.
Still, Bitcoin remains a payment option on High Times’ investment portal but will instead be converted to fiat currency via a third-party.
A Budding Social Platform
Not too surprisingly, advertising cannabis is also mired with struggle. Facebook and Google, who are responsible for 57% of the digital marketing space, won’t advertise for marijuana-based companies at all.
But, with something like CannaSOS, a Canadian, blockchain-based social network, there may be a solution. CannaSOS utilizes blockchain technology to connect buyers, sellers, and advertisers on one intuitive platform. It’s a centralized online meeting place for the related community to find and share cannabis-related information.
When it comes to operating through traditional channels, crypto and cannabis have, for lack of better phrasing, been stuck in the weeds. Perhaps, that’s what makes the two industries such a perfect fit for one another—which could pay huge dividends for California dispensary owners.