Cannabis is one of the most interesting industries in the country. Seen as one of the nation’s fastest-growing sectors, the cannabis space has been extremely lucrative, generating billions of dollars in sales revenue and creating hundreds of thousands of new job opportunities in just a few short years. However, beneath this veneer of success is a young industry that is buckling under a ton of issues, including the lack of access to financial and credit services.
Despite being allowed in more than two dozen states for medical and recreational use, cannabis is still illegal at the federal level, a situation this has had wide-ranging consequences. One of the most damaging is the fact that marijuana-related businesses (“MRBs”) lack access to financial services because banks and credit institutions shy away from working with them due to fear of federal repercussions.
Since federal authorities still haven’t updated banking laws to accommodate the cannabis space, MRBs cannot access electronic payment systems or secure commercial loans on reasonable terms. This means that they must operate on cash-only payment systems, which increases the risk of robbery and burglary, and they cannot pursue opportunities and grow, thanks to a lack of capital. With the federal government poised to discuss a bill that would federally decriminalize cannabis and provide provisions for legal sales, a financial regulator says that passing cannabis banking laws could not be more urgent.
Guidance from the Treasury Department’s Financial Crimes Enforcement Network (FINCEN) for financial institutions keen on working with licensed MRBs was last issued in 2014, underscoring the need for fresh, standardized banking policies for America’s cannabis industry. Rodney E. Hood, a member of the National Credit Union Administration, has requested the formation of a working group under the Federal Financial Institutions Examination Council (“FFIEC”) to develop uniform principles and standards for federal financial institution examinations. This would help create a government entity tasked with developing a preliminary regulatory framework that regulators could use to create the eventual system that would oversee cannabis banking.
The cannabis industry’s most pressing financial needs would be gaining access to deposit accounts, commercial loans at competitive interest rates and electronic payment systems to reduce reliance on cash payment systems. Once these obstacles are eliminated, tax-paying cannabis businesses will be able to operate just like any other legal, tax-paying establishments. But the caveat is that these policies have to be standardized and from the federal government; if not, states will pass their own cannabis banking policies, leading to a patchwork of banking regulations across the country that would take a significant amount of time and effort to detangle.
When enabling federal cannabis banking laws are eventually passed, even companies such as The Alkaline Water Company Inc. (NASDAQ: WTER) (CSE: WTER), which may sometimes be mistaken for companies dealing in marijuana, will breathe a sigh of relief because more opportunities may open up for them.
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CNW420 spotlights the latest developments in the rapidly evolving cannabis industry through the release of two informative articles each business day. Our concise, informative content serves as a gateway for investors interested in the legalized cannabis sector and provides updates on how regulatory developments may impact financial markets. Articles are released each business day at 4:20 a.m. and 4:20 p.m. Eastern – our tribute to the time synonymous with cannabis culture. If marijuana and the burgeoning industry surrounding it are on your radar, CNW420 is for you! Check back daily to stay up-to-date on the latest milestones in the fast -changing world of cannabis.
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