Can Crypto help the Cannabis Industry?

We all read many of the issues plaguing the legal cannabis world in the USA. At the federal level cannabis is still illegal even if some states made it legal. This makes it very hard for dispensaries to open bank accounts and most of them have to deal exclusively in cash. This brings a lot of issues for the dispensaries… theft, safes and a lot more oversight by the owners not to get their money stolen from employees. There has been a few well publicized violent robberies of dispensaries.
In short it’s a trouble any other industry doesn’t need to deal with.

This is where crypto can come and help. Some crypto currencies are a lot better than others to be used as currencies. I would not recommend anyone using bitcoin to pay for supplies. However a lot of other currencies like Litecoin (LTC) has very low transaction fees and are also very quick to process a transaction.

To be honest crypto isn’t a cure-all solution, many found it to be a useful tool to help them navigate the current landscape.

More money, more problems

Although the cannabis industry’s lack of access to banking is its most well-known issue, it’s far from the biggest, according to experts.

Bob Solomon, a professor of law at the University of California, Irvine and co-chairman of the UCI Center for the Study of Cannabis, told CoinDesk that the tax burden, not banking, is the top issue facing the cannabis industry.

Because cannabis is still illegal federally, the industry is subject to Section 280E of the tax code, which means cannabis businesses must pay taxes without deducting the usual business expenses, making profit margins very small.

Henry Baskerville, the owner of Colorado-based law firm Fortis Law Partners, told CoinDesk that the Section 280E tax requirements mean cannabis companies pay around a 70% tax rate, compared with the average corporate tax rate of 20%.

“A lot of people get into cannabis thinking that they’ll make money hand over fist, but they aren’t taking into consideration these taxes and smaller profit margins, so they fail,” Baskerville said.

The burden isn’t just on cannabis companies, though – it’s also passed to the consumers. Solomon told CoinDesk that taxes pile up at every level, including local surcharges, which makes it difficult for legal dispensaries to compete with the black market.

“They don’t want to think that they will accept cryptocurrency payments and be exposed to either capital-gains risk or the risk that these currencies will lose their value suddenly and without warning when tax payments and rent are due,” Khoja said.

Blockchain technology for supply-chain management

Crypto is blakchain but blockchain isn’t all about crypto and payment. Blockchain technology can be used to help any industry for traceability purposes. It’s already being used in the food processing industry with a lot of success.

Ben Bartlett, a member of the city council of Berkeley, Calif., and a crypto lawyer, expressed a similar idea. Blockchain technology can help cannabis companies have compliant supply chains by proving provenance and tracking ownership.

“The cannabis industry has a lot of friction, a lot of redundancy and a lot of authentication. That’s a problem, and through the use of blockchain technology, everything is transparent. With the automated use of smart contracts, it significantly decreases the amount of friction in the cannabis industry,” he said.

420ave take:

In short we believe at 420 ave that blockchain technology can help the marijuana space for traceability purposes. This isn’t good just for the dispensaries but also for the producers and distributors.

As for payment, there are some nice crypto currencies that can be used for payments. Not all of them are good or useful for such purpose however if some pavements can be made via crypto and not cash it’s already a lot easier.

As you can see from this article it’s not an easy business to operate right now in the USA. But the industry is resilient and growing, here at 420ave we do see that this industry has a bright future.