What does the near future hold for cannabis firms and cryptocurrencies?
We’ve witnessed huge changes made in business models as a result of cryptocurrencies already this year and to add to that, licensed cannabis businesses could soon be permitted to pay taxes using cryptocurrencies.
The California Assembly Bill 953 (AB-953) is sponsored by California Democrats Phil Ting and Kevin McCarty and attempts are currently being made to amend California’s existing Revenue and Taxation Code. If passed, the Bill will allow licensed cannabis businesses in California, to pay tax using cryptocurrency. California will soon vote on an amendment to California’s Revenue and Taxation Code.
Cannabis legalization in California explained…
In November 2016, 57% voter approval saw The Adult Use of Marijuana Act (AUMA) pass in California’s State Assembly. As of November 9th, 2016, marijuana has, therefore, been legal in California for both medical and recreational use.
What exactly is Assembly Bill 953 (AB-953)?
Many see California’s stance on marijuana as progressive. It, therefore, shouldn’t come as any surprise that some now want to modernize marijuana business tax laws. First proposed by California Assembly member Phil Ting on February 20, Assembly Bill 953 (AB-953) seeks to amend California’s Revenue and Taxation Code.
“This bill, on and after January 1, 2020, would allow the legislative body of a city or the board of supervisors of a county to determine and implement a method by which a licensee under MAUCRSA may remit any city or county cannabis license tax amounts due by payment using stablecoins, as defined.”
As for why Assembly Bill 953 (AB-953) is necessary, the case made by Phil Ting and Kevin McCarty is simple. Growing, distributing, and using cannabis in California is legal. However, few banks in California allow cannabis businesses to open accounts and manage their daily business affairs. This results in legitimate cannabis businesses being under-banked.
By being under-banked, many cannabis businesses in California are forced to handle and store excessive amounts of cash. This makes businesses a target for criminals. At the same time, it results in many companies paying state taxes in cash, which puts an extra strain on collection departments.
…Enter, stable coins to pay taxes
The only one key problem with paying tax using cryptocurrency rests on the fact that many coin values are inherently volatile. Bill 953 (AB-953), therefore, proposes allowing businesses to pay state taxes using stable coins. No specific stable coin is proposed. However, coins like USD Coin (USDC), could be good candidates, as coin values are always pegged to the value of the U.S. Dollar.
What are the benefits of having a cryptocurrency tax payment option?
If Bill 953 (AB-953) is successful, the impact on businesses and broader cryptocurrency adoption in California could be profound. Paying taxes in cryptocurrency will encourage more cannabis businesses to promote over the counter cryptocurrency payments. This is expected to increase business security and encourage more members of the public to start using cryptocurrencies regularly.
So, how likely is it that Bill 953 (AB-953) will pass?
At present, it is already possible for businesses in the State of Ohio to pay tax using Bitcoin. State Treasurer Josh Mandel has himself supported this initiative, by highlighting how instantaneous, secure, and transparent, cryptocurrency payments are. In this case, there is already a precedent for paying taxes in cryptocurrency in the United States. It may, therefore, only be a matter of time until similar initiatives are rolled out in California and elsewhere.
What are your thoughts on the concept of cyrptocurrency tax payments? Could you see this happening in your home town? Comment below and let us know what you think.