“Cash only” trap
For many years cannabis industry has been suffering from regulations preventing it from emerging from the shadow market and working with the banking system like any official business. And here comes blockchain that can totally solve the problem. The main question is whether it will be able to help the legalization, or anonymity and decentralization will become a serious obstacle?
Arcview Market research shows that the revenue from the legal sale of marijuana will grow to $57 billion by 2027. Statista data shows that in US it’s already a $10 billion market that will double in 5 years.
And yet this enormous industry in US (recreational marijuana is legal in nine states and medical marijuana is legal in 29 states) operates in cash without the ability to keep legal accounts with banks and accept non-cash payments. The reason is that cannabis is still in the “Schedule 1 drug” list, accompanied by heroin and methamphetamine. At the federal level it is still illegal. Those banks that work with cannabis suppliers might get punished for money laundering. Even the US Treasury Department’s FINCEN guidance working with marijuana-related businesses didn't help to take the heat off: financial institutions are still afraid.
So the cannabis industry is forced to be cash only, which causes several serious obstacles:
- Everyone from tax assessors to utilities providers prefer non-cash payments and may even refuse to take cash.
- Cash payments immediately make you the subject for the IRS investigation, as it is extremely suspicious.
- You can’t get a loan. No way to raise money when you plan to expand the business.
- You have to keep cash at the office and therefore the chances to get robbed are growing. Often you get robbed by your own stuff and have to hire guards and install expensive security systems.
- Customers can’t pay with cards.
- Carrying such amount of cash might be quite an energy-consuming task ($1 billion in $100 bills weighs 20,000 pounds!)
Making “cash only” cashless
Here comes the blockchain with all its decentralized power and capabilities for fast online money transfers. Plenty of cryptocurrency startups are trying to enter the cannabis space, introducing themselves as a solution to the industry’s cash problem. Obviously this is not a disinterested impulse: this partnership will bring crypto companies a huge number of extremely loyal customers.
Right now there’re more than 30 existing blockchain projects specializing in marijuana. Here are Top 3 startups based on our editorial choice:
- 1. HempCoin with more than 230 million tokens circulating and $40 million market cap.
- 2. PotCoin with 219 million tokens in circulation and $34 million market cap.
- 3. Paragon - with over 65 million tokens in circulation and $20 million market cap.
CannabisCoin demonstrates interesting approach tying their token to a product: one CannabisCoin for one gram of cannabis. Assuming that one CannabisCoin is currently $0.08, using tokens you get the cheapest joint in the world.
In the beginning of 2018, a cannabis company from Vancouver bought 51% stake in FlipCoin, which is not a coin itself but an app that allows customers to connect to Coinbase and purchase items using their Coinbase wallet. If FlipCoin gets adopted by the cannabis industry, it will be a big step forward for the market.
With another startup anyone (in North America for sure) may be able to participate in a crypto economy growing cannabis with indoor home farming appliances AgroTechFarm.
Due to the fact that none of the largest cryptocurrencies has not yet taken root, and the new specialized cryptocurrencies are in the process of implementation and can not provide the necessary capacity, unstable prices and strict government regulations make them nothing more than a fad at the moment. We will have to hold on and to observe what will be happening, keeping the hope that after 2020 the government will simplify the legislation and make life easier for both producers and users.