Jag DeSaint: Cryptocurrencies Could Solve 2 Big Problems for the Cannabis Industry
Marijuana businesses are mostly blocked from banks and have onerous compliance obligations. Blockchain is a promising solution to both problems.
Image credit: GeorgePeters | Getty Images
Barriers to banking and increasingly complex regulations make running a cannabis business costly and complicated, hampering what could be astronomical growth for the industry. Cannabis cryptocurrencies can solve both problems but, like all cryptocurrency, cannabis cryptocurrencies weren’t created equal. Some cannabis cryptocurrencies exist as a means to invest. Others were designed to address cannabis business’ inability to process credit cards, and little else.
Obstacles facing the cannabis industry.
Legal U.S. marijuana sales will reach between $8 billion and $10 billion in 2018. However, Americans spent a total of $56 billion on marijuana in 2017. In other words, there is a lot of room for growth in the legal cannabis industry, if not for two problems resulting from cannabis’ legal status.
Banking
The biggest issue for the cannabis industry is that marijuana is still illegal federally, which means cannabis businesses do not have the same access to banking or credit card processing as other industries. Operating a cash-only marijuana business is dangerous, complex and expensive. Not only do these businesses have to transport cash in armored cars, but they often cannot open a bank account or qualify for a loan.
To make matters worse, a survey found that only nine percent of Americans prefer paying in cash. Not only is having a cash-only business expensive, but it’s increasingly unprofitable in the digital age.
A complicated supply chain.
The difficulties of managing a cash-only business extend to employee payroll and the entire supply chain. There are a lot of supplies that “plant touching” cannabis businesses — growers, retailers and transporters — have to purchase entirely in cash.
On top of buying everything in cash, they also have to license, lab test and track goods. This requires adhering to contracts and complex city and state-specific regulations, like those facing marijuana growers in California. The “green rush” is more complex and expensive than it appears. Luckily, the cannabis industry can overcome these obstacles with cannabis cryptocurrency.
Cannabis cryptocurrencies offer a solution.
Cryptocurrency is decentralized digital currency. Cryptocurrency mining, the process of solving algorithms to validate transactions within the network and ‘mint’ new coins, replaces governments, banks and credit card companies.
In other words, cryptocurrency doesn’t go through a bank, but through a blockchain. Blockchain is the decentralized, unalterable ledger that records transactions. Since blockchain is not ‘owned’ by a bank that could be accused of money laundering for accepting cannabis money, it can process cannabis transactions in cryptocurrency.
And because cryptocurrency is digital currency, the most common way to spend it is through mobile payment. Since digital sales will reach between $1.9 and 4 trillion by 2020, adopting cryptocurrency as a digital payment could boost business.
Cannabis cryptocurrencies make sense for business-to-business transactions, too. Instead of buying fertilizer with an armored truck full of cash, a marijuana grower could pay with a click, all within the cryptocurrency market.
The supply chain on blockchain.
Blockchain can function as a record for virtually anything. Though blockchain started off as the digital record for Bitcoin transactions, it has rapidly expanded into the private sector.
Companies including Maersk, De Beers and Walmart use blockchain to record supply chain transactions. Smart contracts — agreements with preset constraints that automatically fulfill themselves once terms are met — help move goods between vendors. And blockchain’s ledger can store information about a product, thereby guaranteeing regulatory compliance and quality.
By adopting blockchain, cannabis companies could cut costs, increase efficiency and ensure product value.
Cannabis cryptocurrency market
Today, there are at least 17 cannabis cryptocurrencies. Paragon (PRG) functions as payment for a Los Angeles cannabis co-working space. PotCoin (POT), which has a high cannabis cryptocurrency market cap, has its own ATMs in Colorado.
But like all cryptocurrency news, every coin and token in the cannabis cryptocurrency market has different attributes. Do your own research before you buy cryptocurrency.
HempCoin (THC)
Launched in 2014, HempCoin (THC) was the first cryptocurrency for agriculture. Specifically, HempCoin originated as a tobacco, hemp and cannabis cryptocurrency on Bitcoin’s blockchain.
In 2018, HempCoin pivoted to create a more anonymous blockchain. Now, this cannabis cryptocurrency has masternodes, meaning computers that hold a complete copy of a cryptocurrency ledger. The more masternodes, the more decentralized a blockchain.
According to their whitepaper, HempCoin has two new features. PrivateSend conceals funds’ origins and InstantSend allows for instantaneous transactions. HempCoin is integrating these features into HempPAY, their mobile and online platform, which can also function as a debit card.
HempCoin is also developing a peer-to-peer payment solution. Though it, the customer first specifies how much THC they’re willing to pay. Next, the merchant scans their HempCoin wallet cryptocurrency address to receive the funds.
Growers International (GRWI)
Growers International (GRWI) is a cannabis cryptocurrency and blockchain for investors and growers. Investors can finance cannabis businesses through the Growers International token (GRWI), which the network will pool to make large-scale investments. The platform will eventually accept Bitcoin, Steem and DopeCoin.
For growers, this cannabis cryptocurrency platform will have a cryptocurrency wallet, cannabis and cryptocurrency news, information about nutrients, grow room designs, social media and cryptocurrency price analytics. Furthermore, growers can track plant cycles, initiate smart contracts and buy supplies.
According to their whitepaper, Growers International will build a grow facility in California.
Tokes (TKS)
Tokes (TKS) is a Waves blockchain-based cannabis cryptocurrency for buying marijuana online and in stores. In their whitepaper, Tokes explains that customers first buy Tokes (TKS) on a cryptocurrency exchange, then add it to their wallet, which will also contain product information. Next, they can spend Tokes at approved merchants. All transactions will cost one cent and take less than a minute.
Additionally, Tokes offers a point of sale system. Once the merchant accepts Tokes cryptocurrency, the system automatically converts it to USD, Bitcoin or a currency of the merchant’s choosing.
Cannabis businesses can also pay one another in Tokes through their platform. This is all possible through Tokes’ partnership with TheraCann, software for marijuana producers, processors and distributors. Tokes also gives merchants access to sales analytics and regulatory information.
GreenMed (GRMD)
GreenMed (GRMD) has an app that functions as a credit card for marijuana purchases. The app converts a user’s USD into GRMD tokens. Once the dispensary receives the tokens, GreenMed converts them back into USD. These funds can be transferred to a bank account or withdrawn via the GreenMed debit card.
Though the app, the customer can choose between dispensaries, strains, pick up and delivery and packaging options. Additionally, GreenMed will have its own delivery service, though the app can function as in-store payment.
Overall, the purpose GreenMed token is to facilitate in-app transactions with USD, according to GreenMed’s whitepaper.
Cryptocurrency is an affordable and convenient method of digital payment. The ability to bypass financial institutions makes cryptocurrency adoption especially beneficial for the cannabis industry.
Furthermore, cannabis could benefit from blockchain adoption. The distributed ledger can securely store data and ensure strain quality and regulatory compliance, all while facilitating business-to-business payments.
