More and more legal marijuana ventures are being forced into using alternative currencies, better known as cryptocurrencies such as Bitcoin in order to do routine money transactions. Due to the refusal of many traditional financial institutions to provide services to the legal marijuana industry, these businesses are left with no other choice. In fact, the lack of being to conduct normal banking is one of the cannabis industry’s biggest problems. Legal marijuana was a $6 billion industry in 2016 and is expected to grow to $50 billion by 2026, which would include CBD oil sales, according to industry estimates.
But since cannabis is still illegal under federal laws, many banks and credit card processing companies are rejecting this business. So, merchants are faced with the dangerous proposition of dealing with hoards of cash or using digital currencies like Bitcoin, the most prominent digital currency. That’s forced most cannabis merchants to accept cash only, a logistical headache and constant security threat. This is not only the case for recreational marijuana but many companies selling non-psychoactive substance CBD oil are experienced problems acquiring credit card processing accounts.
There are currently two young financial-tech companies, POSaBIT and SinglePoint Inc., which use the Bitcoin to help businesses and consumers use credit cards for cannabis sales and purchases. “It’s almost impossible to operate a business in todays’ worlds on a cash only basis but the demand for cannabis related products is so strong that businesses and consumers are willing to endure the aggravation and risk” says Charles Franklin, a director of the CBD review site CBDReVu.com.
Trove Cannabis, one of the Washington stores using POSaBIT, sold $3 million of marijuana last year in cash and brings in a staggering 3,000 transactions weekly. Trove Cannabis starting using the POSaBIT system last February but to get on that system they were on a waiting list for a full 6 months. The system works like this. A customer comes into the dispensary to make a purchase. The clerk in the store asks the customer if they want to pay in cash or Bitcoin. If the buyer chooses Bitcoin, a $2 dollar transaction fee is added on to the transaction. But it is a cumbersome process. The customer must use their credit card to first purchase Bitcoins. The customer does this through a POSaBIT kiosk. That apparently is where the $2 transaction fee is charged. So, the customer now owns Bitcoin in the amount of the value of the transaction, which they can now exchange for the product they wish to purchase. Once the customer completes the transaction in the store, POSaBIT, which gets the $2 dollar transaction fee, then sends appropriate converted dollar amount to the retailers’ bank account.
Some folks are big fans of Bitcoin but there are many pitfalls including the bubble like price fluctuations in the value of the Bitcoins themselves. Bitcoins are bought and sold like commodities, currencies and stocks but the value fluctuates wildly. Speculators trade bitcoins like currency traders trade currencies, and like commodities traders trade pork bellies. And, there is the likelihood that Bitcoin could be a facilitator of dirty money transactions around the world, as the digital currency seems ripe for that type of illicit activity in the so-called dark web. So, many observers think the Bitcoin system itself is a regulatory accident waiting to happen. But in the meantime, many legal cannabis businesses have no choice but to seek out these types of alternative means of banking.