No longer all-cash, the future of cannabis banking comes into view

No longer all-cash, the future of cannabis banking comes into view

VicesMarch 06, 2018 By Reilly Capps

Do you deal with cash anymore? Of course not. You're no savage. You use credit cards to buy groceries, gas and video games like a normal human being.

Of course, you do use cash for things that are illegal or illicit: sex and bribes and gambling and drugs.

Is cannabis illegal or illicit? Depends on who you ask. But based on the fact that law-abiding customers still have to use cash in many or most marijuana dispensaries across the country, it makes buying a doobie seem as illicit as boning a rent boy while betting on horses.

But that's changing. More and more, pot shops have access to the modern financial system — to credit cards, bank loans and credit unions. And they're doing it in creative ways that might help change the whole banking system.

First, there's the old fashioned institutions: more cannabis enterprises are finding themselves welcomed by banks with open arms. More than 300 banks and other financial service providers were servicing pot businesses as of September of last year, according to the Financial Crimes Enforcement Network.

That's a rise from … almost none … in 2013. The spike came after the Obama administration's Financial Crimes Enforcement Network issued guidance for banks, when it said it wouldn't go after banks for handling marijuana money as long as they kept an eye on their clients for super-shady stuff, like funding gangs.

[From almost no federal banks working with pot businesses in 2013 to more than 300 today. Graph from FinCEN.]

“We’re definitely seeing more businesses in the industry getting banked every day,” Aaron Smith, executive director of the National Cannabis Industry Association, a trade group, told the Huffington Post.

State governments are pushing for more transparent banking. Washington State last year encouraged its businesses to open bank accounts and pay taxes with checks or bank transfers. Nearly all taxes in Washington State are paid today in some form other than cash.

Now, here's the truly exciting part. Just as pot is known to enhance lateral thinking — so this banking revolution in cannabis is happening in creative ways. New methods that might not only change the pot game, but might spread to other parts of the financial system.

These methods tend to combine technology with local control to bypass the feds.

In California, the treasurer and attorney general are studying whether the state can create its own publicly owned bank. It's been supported by pot companies, who believe that a public bank would be less subject to federal oversight.

"California and other states will need to lead when it comes to bringing the cannabis industry out of the shadows so that it can be properly regulated to prevent sales to minors, to protect the public's health and safety, and ensure cannabis businesses behave as legitimate, tax-paying members of our economy," California treasurer John Chiang said in a conference call, as reported by the Los Angeles Times.

Hezekiah Allen, executive director of the cannabis trade group California Growers Association and a member of Chiang's working group, told the Times that, "If there were a public bank and our members could do business with it, our members would open accounts in droves."

In Hawaii, they're using a phone app to get around federal regulations. Hawaii announced it's encouraging pot sales to be done without cash, saying they wanted to avoid robberies and other crimes. You use an app called CanPay, which facilitates transactions through a Colorado-based credit union. Hawaii, too, would like to move toward a state-created bank.

The federal government might struggle to stop these movements. In the face of all this, even the crusty old trust-funders who run the banking system — who haven't smoked anything much more stimulating than a cuban cigar, and whose top cop, Jeff Sessions, thinks marijuana is satan's armpit hair — seem to be softening on pot.

When asked last month about the dangers created by forcing weed operations to be more cash-heavy than strip clubs and heroin refineries, treasury secretary and trophy wife enthusiast Steven Mnuchin indicated that banks should be open to ganja cash. “I assure you that we don’t want bags of cash,” Mnuchin told the House Financial Services Committee. “We want to make sure that we can collect our necessary taxes and other things.” So ... even though the Trump Administration tells America to Just Say No to drugs, they won't say no to the drug taxes. Ain't America great?

The future of cannabis banking has never been brighter, more open and more diverse — ironically, not just in spite of the threat from the Trump Administration, but actually because of it.

So while you'll still have to keep cash on hand to tip your stripper, grease the palms of the maitre'd or grab at some bars from your plug, your pot transactions will start to look more like your other purchases — legit.