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CANNABIS CORNER: Cannabis and Crypto – Like Peas and Carrots?
Traders Magazine Online News, January 29, 2019
Cannabis. Cryptocurrency. Two of the hottest keywords, hastags or assets that people are talking about.
So, these are two great tastes that go great together, right? Just like peas and carrots or peanut butter and chocolate. Well, maybe. And maybe not.
Traders Magazine recently discussed the potential union between cannabis and crypto with San Francisco-based Liz Prehn, lead tax attorney at Moskowitz LLP, who discussed some of the benefits and pitfalls of the pairing of cannabis and cryptocurrency.
First, the advantages or cryptocurrency in a canna-business.
“Well first, it is legal,” Prehn began. “Despite its volatility as an investment, and the tax and regulatory issues surrounding it, there is nothing illegal about using cryptocurrency. Also, it’s secure. Cryptocurrency’s blockchain technology provides a secure payment and tracking process for cannabis transactions – that doesn’t require an armored contingent.”
Also, cryptocurrency accounts and transactions are anonymous, an additional benefit to customers who don’t want their marijuana purchases known. Prehn continued that digital assets provide for the immediate settlement of funds and the underlying or when combined with blockchain technology provides for nearly instantaneous validation of all transactions, as opposed to waiting hours or days for a credit card payment to post.
“There are lower transaction fees. Even cannabusinesses that manage to arrange for credit card processing, as a high-risk industry the transaction fees can be significant,” she continued. “With cryptocurrency, the fees are generally less than 1% and it’s available everywhere. Cryptocurrencies, including cryptocurrencies developed specifically for the marijuana industry, can buy most anything, anywhere in the world.”
Furthermore, Prehn pointed out that using crypto promotes transparency. She explained the sale of marijuana requires a thorough record of the movement of the product from the grower through to the end user. Cryptocurrency provides this record through Blockchain technology, which keeps incorruptible and transparent digital records.
“And there are additional benefits. Some companies provide digital tokens or cryptocurrency rewards that can be used for marijuana purchases,” Prehn said. “For example, PotCoin community members get benefits for prescription medical marijuana through WeedMD.”
But, using crypto with cannabis isn’t without concerns or disadvantages. Prehn explained that for a business with little or no traditional banking support, cryptocurrency seems prima facie like a great idea. However, it is important to acknowledge the following concerns – many of which have been publicly voiced.
First, it may undermine the legitimacy of the state-legal marijuana industry. The marijuana industry, she explained, is struggling for legitimacy in the eyes of the public and the U.S. government and that aligning itself with another federally unregulated industry may undermine these efforts.
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