The banking problems of Marijuana-Related Businesses (MRB) is real. Currently, 34 states within the US allow either recreational or medical usage of cannabis. Even though possession and distribution are still illegal, the MRB industry’s estimated worth is at $16 billion. This number is expected to reach $57 billion by 2027.
Yet, only 30% of the MRBs have a bank account. The majority of the businesses are effectively underbanked, and according to FTX US’s president Brett Harrison, crypto can help them out. In a recent Twitter thread, Harrison described the reasons why MRBs are underbanked and described how crypto can be applied to provide an effective solution.
1/ Cannabis and digital assets
— Brett Harrison (@Brett_FTXUS) March 18, 2022
Reluctance of Banks
Harris gives three reasons why major national banking systems are not eager to accept MRBs as customers.
The first reason is that the state-based legalization of cannabis is not good enough for them. There are still 17 states that haven’t legalized marijuana. Harrison argues that until cannabis is legalized federally or legislation on legalization passes, national banking systems will not accept MRBs as customers.
Secondly, according to Harrison, banks treat MRBs as high-risk businesses which fall under the same category as gambling or firearms businesses. High-risk organizations require certain compliance programs which may be prohibitive for local credit unions and community banks.
4/ (b) MRBs are treated by banks as high-risk businesses similar to gambling and firearms businesses, and the costs associated with the necessary compliance programs may be prohibitive for local credit unions and community banks
— Brett Harrison (@Brett_FTXUS) March 18, 2022
Finally, even if MRBs are able to obtain local bank accounts they are still not properly banked. Harris says that their own banks and other issuing banks often deny access to point of sale banking. In other words, even the banked MRBs don’t have access to the use of major credit or debit cards, ACH etc.
As a result of the above reasons, the majority of MRBs are only able to accept cash which requires them to hold substantive amounts as well. As cash stockpiles accumulate at dispensaries, crime risk increases and creates a major burden on law enforcement.
Solution
Harris argues that crypto can be the solution to this predicament.
First of all, crypto exchanges also provide depository services as the banks do. Moreover, crypto exchanges’ services have lower fees, provide access to payment rails and offer a wider array of payment options.
Secondly, stablecoins could help stabilize the cumulative capital of MRBs. Stablecoins do not risk unexpected value losses and can facilitate instant settlements away from cash. This way, cash piles would disappear and crime risk would diminish. In addition, MRBs can take advantage of the sophisticated cybersecurity services offered by crypto exchange platforms.
6/ As a result of the above, MRBs primarily accept and hold cash. Cash stockpiles accumulate at dispensaries, which increases crime risk for local communities and imposes major burdens on law enforcement.
— Brett Harrison (@Brett_FTXUS) March 18, 2022
Finally, addressing the lawmakers, Harris mentions the benefits of the state-wide legalization of cannabis. In addition to making MRBs’ lives easier, it would allow taxation and create a considerable additional income for the state. His tweet says:
“State legalization of cannabis is an effective tool for generating tax revenue, and when paired with pardon programs an create new economic opportunities for those who have been disproportionately disadvantaged by drug sentencing laws.”
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