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Can Digital Currency Help the Pot Industry's Banking Problem?

Is going digital the solution to legal marijuana's financial hurdles?EXPAND
Is going digital the solution to legal marijuana's financial hurdles?
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Financing has always been rocky for Colorado's legal marijuana industry, which largely operates in cash because of the plant's federally illegal status. Only an estimated 35 financial institutions in Colorado deal with the cannabis industry, and they try to do so anonymously, according to Amanda Averch at the Colorado Bankers Association.

To move around this, some dispensaries are experimenting with digital currency and payment apps.

Boulder dispensary Helping Hands Cannabis was the first marijuana store in Colorado to accept Bitcoin and Ethereum, two popular forms of cryptocurrency, in 2019. The shop introduced the Strike Payment app to customers shortly after, allowing shoppers to scan their phone wallets' QR codes for a cash-free plug. The app functions similarly to the Western Union and TransferWise money exchange services, but users don't have to deal with the nitty-gritty of taxes, fees or even the complexity of Bitcoin, as the Strike automatically converts U.S. dollars to Bitcoin for users to spend effectively.

“It actually just feels like a normal payment app that everyone is used to,” Helping Hands general manager Johnny Kurish says. “If things keep going this way, we would love it, because Strike has much lower fees [compared to credit card transactions].

According to Kurish, the financial transition has been smooth after the initial push to get customers to adopt the practice. Now the dispensary can accumulate and invest in Bitcoin, he adds, while avoiding the annoyances of a regulated monetary system such as that of a bank. Since the pandemic, the store’s curbside pick-up orders have largely been paid for through the app, which he says is becoming the favored payment method among regular customers.

And it's not just Bitcoin anymore. Cannabis-specific digital tokens are trying to get in the game, too — though they're still trying to hit the mark.

In 2014, Colorado-born PotCoin began mining to support a network of crypto-cannabis exchanges. By 2015, community members from PotCoin set up ATMs across several dispensaries in Colorado. However, the cryptocurrency hype hadn't broken into the general public yet, and most customers continued to use cash. In 2019, the company lost its lead developer and talented coder, Snowy13 (Jim), to cancer. The PotCoin community is now further developing its platform and currency to introduce PotCoin 2.0, a new blockchain infrastructure.

Another viable option that's closer to traditional banking is Littleton-based CanPay, a non-crypto payment app used at forty dispensaries across Colorado and hundreds across the country. The CanPay Closed-Banking Feedback Loop allows debit payments for cannabis without the often-feared business risk of losing a bank account, and doesn't include any convenience fees.

As marijuana delivery gains steam in Colorado, the need for cash-less payments is likely to increase, but the solution must be user-friendly, Averch adds.

“The issue is that for any innovation that happens, the benefits of that cannot be realized if they are not delivered responsibly and in a way that answers the needs of customers,” she explains.

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