The Marijuana Industry Blockchain Initiatives
Why a Marijuana Industry Blockchain Initiative
The legal marijuana industry is presently working in an environment where cash is not only King it is the only thing. Federal laws have not changed and states that have legalized pot, regardless of the Federal statutes, are in a quandary on how to deal with the existing banking rules and regulations. This leaves a huge gap in the successful operation of the legal marijuana businesses and one would think a hindrance to any long term growth.
Blockchain for Transactions
Enter Bitcoin. From the Bitcoin Wiki – Bitcoin is a decentralized digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: transaction management and money issuance are carried out collectively by the network. Cryptocurrency seems like a perfect fit for the Marijuana Industry which since 2012 has been an all cash business. A business that reached $7 billion this year. So the question is can two things, Bitcoin and Marijuana Business, both with uncertain and fluctuating legality, be Happy Together?
Since 2012 Bitcoin has been used to some degree for purchases in Colorado and Washington. But Bitcoin Companies have much trepidation doing business with Marijuana Companies in fear of being shut down by the DEA or the FBI. And the Marijuana Companies do not want to bring undo attention to themselves by using a currency that many still see as a way to launder money and is sometimes associated with other illegal activities. Is there a way to bring these two parties together to solve the currency exchange problems of the Marijuana Industry and also lend some credence to Blockchain cryptocurrency.
Blockchain for Banking
Blockchain may be a solution to the Marijuana Industry’s currency problem but not in the way you might think. Several companies are developing a solution utilizing the Blockchain model on the back end with a normal credit-debit-cash exchange on the front end. Thereby alleviating customers need for a Bitcoin wallet and actually keeping Bitcoin itself invisible to both the salesperson and the consumer
The NY Times reports that a company called Tokken, founded in 2016 by Lamine Zarrad is doing just that. Since arriving in the U.S. as a young refugee from Azerbaijan, Zarrad has taken turns as a Marine, a Wall Streeter and most recently, as a self-described “bank cop” for the U.S. Treasury’s Office of the Comptroller of the Currency. He quit that last job to start Tokken after coming to understand the impact that being unbanked has on cannabis entrepreneurs.
Mr. Zarrad’s start-up, Tokken, is aiming to offer something new — an electronic payment system that will not rely on the credit card companies or debit networks. Somewhat like PayPal or Venmo, Tokken will use the electronic money transfer system in the United States known as the Automated Clearinghouse, or ACH, to move money from the bank account of a dispensary customer to Tokken’s bank account. Tokken will then keep subaccounts for each dispensary — making it unnecessary for the banks to deal directly with dispensaries.
What sets Tokken apart is that every transaction will be recorded on the ledger underlying the Bitcoin system — known as the blockchain. Because transactions on the blockchain are irrevocable, pot dispensaries and banks will have a reliable and complete record of all Tokken transactions, including the specifics of each transaction — without requiring any Bitcoins to change hands (a tiny portion of a Bitcoin will be sent between Tokken accounts in order to record the transaction on the blockchain). Tokkens Blockchain prescription seems like an exquisite solution to the Marijuana Industry’s banking problems without resorting to Bitcoin wallet transactions.
Blockchain for Supply Management
Where else can Blockchain assist in the world of cannabis? Another company, this one you may know, IBM, is looking at using Blockchain to track the Marijuana Industry from seed to sale. Bloomberg reports that IBM is looking at creating a supply management tool whose digital ledger would take control of sourcing, selling and pricing of products. The shared ledger is updated in real-time and reveals exactly where a product is at any point in time. IBM’s white paper submission to British Columbia “was in response to a government request” and believes “this type of transparency would bring a new level of visibility and control”.
Is Blockchain the answer to some of the Marijuana Industry’s most important and pressing issues? Will Bitcoin implode as it continues its meteoric rise? Will the Federal Government step into the cryptocurrency world and shake things up? The jury is still out on all cryptocurrency’s but the technology, blockchain, is here to stay and could be a big win for the Marijuana Industry.