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Crypto, SAFE Banking Act, and Cannabis

The United States Senate continuously denies access to digital payments and banking to the cannabis industry as retailers are forced to endure the increasing threats with more frequent armed robberies. Instead of involuntarily unbanked businesses forced to operate in cash, the crypto payment provides an immediate alternative. Encouraging and adopting crypto payment is a wise, timely, and well-tailored public policy response from legislators and regulators as they cannot wait for Congress to protect cannabis businesses and communities.

As the federal continues its failure to provide access to banking and electronic payment to legal cannabis retailers, the cannabis industry nationwide faces deadly real-world implications. While the all-cash cannabis business is considered an opportune and lucrative target for armed robberies by violent criminals who won’t mind killing employees and others if they come in their way. Meanwhile, the state and local cannabis regulators are urging Congress to pass the Secure and Fair Enforcement (SAFE) Banking Act to fix this situation.

The legal cannabis retailers in the United States alone are forecasted to generate $130 billion in sales in this year’s April 20 holiday. Even so, less than 800 institutions in the United States are currently ready to bank the cash revenues of those sales or even provide access to cashless transactions.

Since the cannabis retail business is very lucrative, and when some elements of law enforcement in certain jurisdictions do not offer protection to these legal cannabis businesses, they become a prime target for the criminals.

There are only a few institutions that currently bank cannabis businesses. They accept enormous regulatory risk by advancing under existing (but non-binding) Obama-era US Department of Treasury recommendations. They do not establish any safe harbors or provide any legal certainty but do dramatically increase their expenses of complying with federal banking laws.

Despite the tremendous threat to public safety, the Senate has consistently failed to act on the SAFE Banking Act, which would provide legal clarity and give federally licensed institutions eager to bank cannabis a safe harbor under anti-money-laundering rules.

It is thought that this action would multiply the number of these institutions, thereby making it easier for the cannabis industry to access these banking services. The very fact of continuous Senate failure is exposed on six occasions while passing some versions of the SAFE Banking Act, including the recent ‘House version of the America COMPETES Act.

Even if the Senate provides cannabis businesses with access under the SAFE Banking Act, cryptocurrency offers a superior alternative to traditional payment rails and the federally regulated banking system as they are viable and an incredible alternative to the all-cash status quo.

Under such circumstances, it is difficult to argue on digital payments as an alternative as they provide technical feasibility and are commercially available.

Even if the SAFE Banking Act is passed, it is pretty obvious considering the advantages of the crypto payment in relation to the banks and their digital payment rails.

Relying on crypto

While most regulators and industries feel that passing the SAFE will instantly improve and increase access to banking and digital payment for all industry operators, cash payments will soon be phased out. Even though enacting SAFE is still a crucial legislative step toward giving the equal industry access to banking and merchant services, it will only reduce cash transactions and is unlikely to provide immediate results.

The licensed cannabis retailer’s sales would no longer be considered as ‘proceeds of unlawful activity’ under federal anti-money laundering or ALM laws after passing the SAFE act. However, these proceedings would still be under heightened scrutiny and exhaustive ‘suspicious activity reporting’ requirements by the bank under the same ALM laws. There will be a significant increase in the bank’s cost of compliance with the federal regulation, as the cost would be passed with a significant increase in fees to the account holders due to acceptance and processing of their deposits. It is essentially how U.S. banks are willing to bank the dank at the moment.

It is quite difficult to comprehend how small women and minority-owned businesses would be able to absorb these fees. However, additional steps and implementation of this act would take years for these businesses to gain equitable access to financial services.

The ease of tracking transparent, open, and widely accessible transactions through the public blockchain makes cryptocurrency payment seem a favorable option. Each transaction recorded in the blockchain cannot be tampered and can determine any volume of any unlawful proceeds through a licensed cannabis business. Provided the law enforcement is responsible and has access to identifying public wallet addresses for legitimate concern, as required by the Constitution.

There is no need to provide access to transactional data by the third-party intermediaries as no mandates are required.

Thus, with such circumstances, it is the best and imperative alternative for the adoption of cryptocurrency payment among cannabis retailers.

The Congress should ideally pass the SAFE Banking Act at the earliest. Meanwhile, the cannabis business, consumers, and regulators should avoid depending upon Congress. Since their decision will first be in the public interest. Instead, they should pressure the state and local lawmakers to adopt cryptocurrency as an alternative payment as an urgent demand under the law. For instance, passing a bill allowing the payment through cryptocurrency for paying off taxes of cannabis businesses.

Although there are some far-sighted elected officials like Colorado Governor Jared Polis and New York Mayor Eric Adams from states that legalized cannabis sales. They are already promoting the idea of accepting crypto for taxes. Still, many more need to come forth to get the deed done. States and local legislators should immediately act fast in public safety and take deliberate action to integrate legal existing cannabis point-of-sale into cryptocurrency payment. As a result, lawful, tax-paying, and job-producing businesses will be able to flourish and stay afloat.