If Congress won’t help, it’s time for the cannabis industry to help itself. Cryptocurrencies offer legal cannabis businesses immediate alternatives to both an exclusionary banking system and operating all-cash businesses. We need to adopt them now.
Over the last 25 years, the state-legal cannabis industry has grown exponentially, but banking the proceeds of even a lawful cannabis business is still illegal under federal anti-money laundering (AML) laws. This effectively excludes the industry (and any businesses that serve it) from accessing banking and financial services.
Khurshid Khoja is a principal at Greenbridge Corporate Counsel, a law firm that represents legal cannabis businesses. This article is part of Culture Week, which explores how crypto is changing media and entertainment.
The industry has struggled to address the rising threat to public safety caused by forcing legal cannabis businesses to go unbanked and self-custody large amounts of cash. With each new state that legalized cannabis, the problem has only grown in scale and geography while Congress has mostly stuck its head in the sand.
While cannabis businesses have always been keenly aware of the threat of armed robbery, the violence employed to carry out these robberies has also grown more organized and audacious, frequently employing heavily armed and organized crews and too often ending in gunfire.
I and other industry advocates (including cannabis business owners, cannabis workers, medical cannabis patients, drug policy reformers and others) have long focused our efforts to address this threat on the reform of banking laws, diligently lobbying lawmakers to pass the Secure and Fair Enforcement (SAFE) Banking Act. Along with other members of the National Cannabis Industry Association, I’ve traveled to Washington, D.C., on a yearly pilgrimage to the halls of Congress in order to educate lawmakers on why banking access is a public safety issue.
As we explained to our members of Congress year after year at these visits, most state-licensed cannabis businesses have experienced being excluded from banking services and/or being abruptly and involuntarily unbanked after obtaining those services. This leaves these businesses in the unenviable position of operating primarily in cash, accepting payments in cash alone, and constantly housing, securing and transporting large amounts of cash every day – making their personnel subject to armed robbery or worse.
But despite years of effort to educate Congress, it has done little to reduce this threat. It has been especially frustrating to see state-legalized businesses (and their individual employees, customers and owners) continue to live under constant threat to their physical and financial well-being year after year from an avoidable risk to public safety. And, unfortunately, Congress just abdicated its duty to address this danger yet again last week, ironically through legislation to fund the defense of our country.
Specifically, Senate leadership refused to include the language of the SAFE Banking Act within the must-pass National Defense Authorization Act – despite entreaties from their colleagues in the House of Representatives (who have now passed the bipartisan SAFE Banking Act, in one form or another, multiple times). With the stroke of a pen, the act would have reduced the incentive to attack these essential businesses, removing the cash-rich honey pots from these stores.
To call this circumstance deeply disheartening doesn’t begin to capture the feelings of desperation and disillusionment at play, especially among already-struggling cannabis retailers. If Congress refuses to help, it’s time to help ourselves. As an industry advocate, I think it’s time to embrace the previously unthinkable – being completely and voluntarily unbanked as an ideal to be attained rather than a circumstance to be avoided.
It behooves the industry (and especially small, minority- and women-owned cannabis businesses) to look outside the traditional financial institutions for secure deposits, business loans, payment processing and other basic financial services. Cryptocurrencies offer the only immediate alternative to operating all-cash businesses, and a practical substitute for the banks that can’t yet service legal cannabis businesses (and for those banks that may choose not to, even after SAFE Banking passes).
Cryptocurrencies hold incredible promise, and not only for providing access to financial services through decentralized finance (DeFi). They have the ability to level the playing field between large, well-capitalized multistate operators (MSOs) on the one hand, and small businesses (including woman- and minority-owned enterprises, and social equity licensees) on the other.
The large MSOs can afford access to banking today under the currently effective, highly restrictive and overtly discriminatory FinCEN guidelines, and will pay the exorbitant fees charged by the banks to offset the cost of heightened surveillance needed for AML compliance.
Small businesses cannot access those banking services on relatively comparable terms, or at all. Put differently, while federal law remains unchanged, the biggest banks and their MSO customers have the financial means to get federal regulators to look the other way on their otherwise willful violations of AML laws – but everyone else gets shut out.
While my industry colleagues and I have no intention of abandoning the SAFE Banking Act, it’s been sobering to watch Congress’s purported cannabis champions repeatedly fail to champion public safety. It shouldn’t come as a surprise then if cannabis businesses grow steadily less apprehensive about the prospect of being liberated from the banking system (and the financial surveillance that comes with it), and increasingly more disillusioned about securing future access to financial services through congressional action alone. Cryptocurrency is a viable alternative today, and it’s time for the cannabis industry to help lead its adoption.