The growth of the cannabis industry in recent years has surpassed the expectations of many. The industry went from being stereotyped and rejected in many parts of the world to being a global jewel. This growth has majorly been caused by the growth of the medical applications of the natural herb which is making many change their wrong beliefs about cannabis. This change has brought the industry to a place where it is valued in millions of dollars and the numbers keep on rising.
The opening of different legal markets in different states in the US has also helped to promote the growth of the industry. It should be noted that countries like Canada have fully integrated the benefits of cannabis into their system and they are better for it. The major issue still facing cannabis businesses in the United States is the illegal status of the natural herb federally and this can change soon. History was made in March 2018 when Canadian company Cronos Group was listed on the US Stock Exchange. This was a first for any cannabis company and many more are bound to follow. While the cannabis industry is making strides and scaling new heights, the major issue of the legal status of cannabis federally still causes problems that spread into different sectors thus hindering the industry.
A closer look at roadblocks hindering the cannabis industry
The major issue affecting the cannabis industry in the US is the illegal nature of the natural product in the eyes of the federal government. Cannabis is classified as a Schedule 1 narcotic which means the herb is classified as having a high degree of dependency with no medicinal value. Different studies and the opening of legal markets in different states speak to the contrary but the federal scheduling still stands. This status has created a number of issues for the cannabis industry with other industries and has made some services hard to obtain.
Most legal cannabis companies are compliant with the laws in the states where they operate. Unfortunately, federal laws also apply in some jurisdictions in these states which have hampered some of the activities of the industry. Issues such as transport of cannabis products within states, advertising and marketing for cannabis products, and rules of engagement with federal agencies always prove problematic. Some of these issues make life hard for players in the cannabis industry and beneficiaries as well.
Access to financial services has always proven a huge problem for cannabis companies. Insurance brokers and banks shy away from offering services to cannabis companies making financial services tougher for the industry. The Bank Secrecy act explains that it is illegal for a bank to offer financial services to businesses that violate federal law. This has been used by banks to shy away from offering financial services to cannabis companies but that is not all that there is to it. The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) already provided a way out for banks to deal with cannabis companies. However, due to fear of contradicting the federal government and the high cost of FinCEN compliance incentives, most banks don’t take the big step.
What is the solution to the financial issues of the cannabis industry?
Due to the lack of financial services for cannabis companies, the industry is predominantly cash-based. This cash-based system poses a problem because it is susceptible to risks that would’ve been otherwise avoided. Using cash means there is a huge possibility of misplacement and miscounting. It should also be noted that due to the common presence of cash in dispensaries, they are targets of robberies. This poses a huge risk to the employees and customers alike. Despite the fact that cannabis companies use quality security services, the threat cannot be completely dispelled.
Many players in the cannabis industry believe cryptocurrency is the answer to most of the financial woes of the cannabis industry and they are not wrong. Cryptocurrency has grown considerably over the years and it offers some services that solve the issues of the cannabis industry. Here are 3 ways blockchain will help to solve the biggest roadblocks of the cannabis industry.
The Cash Issue
Blockchain offers an alternative to cash and banks that has been a major issue for the cannabis industry. Potcoin is a major example of this possibility. Potcoin is a popular marijuana-based cryptocurrency made exclusively for the cannabis industry. The use of cryptocurrency helps to make payment easier as customers can simply transfer to the wallet of the dispensary without issue. This eliminates the risk to the customers and the employees. It also ensures revenue is not misplaced or stolen.
Access to loans
Many cannabis startup companies require loans to push their business in the industry. Unfortunately, with the Bank Secrecy Act, banks are not willing to offer such services to cannabis companies. The thought of the federal government seizing assets also hovers over the heads of banks restricting them from committing. Cryptocurrency unfortunately is not held back by such restrictions. Crypto-cannabis cannabis can help to solve this issue as they will have access to crypto-based business loans.
Inventory and record-keeping
For cannabis companies, it is important to always ensure proper inventory and record keeping. This is because it is important to ensure compliance with state regulations required for operations. Proper inventory management and record-keeping help cannabis companies to show that cannabis products are in the quantity and quality they say they are in. Substantial manpower is required to process the data inputs from this system and there are always issues of reliability of such data. Blockchain technology has sufficient supply chain management systems to make such analysis better. With an immutable transaction ledger for keeping records, inventory management becomes easier. The blockchain ledger is cost-effective and tamper-proof making it perfect for the cannabis industry.
Times are gradually changing and it is important that the cannabis industry evolves. Adaptation has never been more important. Blockchain offers a unique way out for the cannabis industry in terms of financial issues without much hassle. Proper utilization of its services can be the answer the cannabis industry has been waiting for to settle its financial service issues.
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