Without Banks, Cannabis Companies Are Turning to Crypto

One way that cryptocurrency can be used to help small businesses that can't access traditional financial services.

36 states have legalized medicinal cannabis, while 17 allow recreational use.

However, banking can be difficult for cannabis businesses. Because federal law prohibits the sale or distribution of marijuana, banks are wary about working with cannabis companies.

This could make cannabis cash liable to banks as it could be considered money laundering. In the same way, payment processors and credit card businesses don't want any type of lawsuit.

A bill to legalize cannabis banking is in the works. Some cannabis companies have turned to cryptocurrency to fulfill their banking needs.

Why cannabis companies have embraced crypto

It's difficult to run a business when you are unable to accept debit or credit card payments and don't have access other financial services such as loans. Many cannabis businesses are forced to rely on cash. Cash isn't the best.

Thieves are more likely to target cash-only businesses. It can be difficult to file an insurance policy for stolen cash if a store has been robbed. It's harder to manage a business, from managing payroll to paying rent.

Cryptocurrency is a possible solution. Cryptocurrency Exchanges do not have the same regulatory framework as banks. It's much easier for companies to open accounts.

Here are the benefits that crypto can bring to cannabis companies:

• Cash-free transactions

• Lower fees. While some banks offer services to cannabis businesses, they charge high fees. Crypto banking, on the other hand, has relatively low fees and doesn't charge a premium for cannabis companies.

• Transparency. Cannabis businesses must comply with several compliance protocols. Blockchain technology allows for a secure, tamper-proof ledger that can be used to track every step of the supply chain.

• International transactions. Cannabis businesses that have to operate overseas can pay quickly and cheaply with digital currencies.

Cryptocurrency won't solve everything

Crypto banking is a strategy that cannabis companies can use to reduce their dependence on cash. However, it has its downsides.

For example, cryptocurrencies taxation is different than regular business income. You will need to keep track of every transaction and also track the value of each cryptocurrency against the dollar at time of transaction. This can be costly and time-consuming.

Another important aspect to be aware of is volatility. Prices of Bitcoin and other cryptocurrencies can fluctuate greatly. We've seen prices drop by almost half in the past six weeks. Prices have rebounded slightly over the following months.

You might find your assets worthless if you sell something for 0.02 bitcoin. This could cause financial problems for your company.

The opposite may also be possible. In the hopes that it will become more valuable in five to ten years, you may decide to keep your Bitcoin. For small businesses that have to pay suppliers and manage their cash flow, this is not an option.

Stablecoins are one way to get around this problem. These digital currencies are tied to the dollar or the gold price. You won't suddenly find that the capital you need for your business is worth less than you thought. After each transaction, you can convert your crypto to fiat (traditional currency).

Cannabis and crypto may be natural bedfellows

Both cryptocurrency and the cannabis business have many things in common. After years of being on the fringes, both are now mainstream. Both industries might be able to work together.

It could be a step in the right direction for other companies to embrace digital payments and deal with the issues presented by alternate systems. The cannabis industry may be able to use cryptocurrencies to get the financial services it requires and be less dependent on cash.

Tokin Coin (TOKN) is here to solve the problems the cannabis businesses face and integrate with their point of sale machines to provide an easy-to-use currency that rewards both the consumer and the business owner. Buy Tokin Coin directly from us and get started today!