One of the biggest problems legal dispensaries face is how to actually complete financial transactions, or banking. Since marijuana is illegal at the federal level, most banks will not let dispensaries open accounts with them. Major credit card companies have also refused to do business with dispensaries. Without normal bank accounts or the ability to run credit cards, most dispensaries are cash-only. And that creates a whole new set of problems.
Cash-only businesses are more likely to be robbed. They can also be a good way to launder money. This second problem has made banks even less willing to work with dispensaries. But now, a number of tech startups are coming up with what they see as possible solutions to this problem.
Lamine Zarrad used to work in the banking industry. Following that he was a federal banking regulator. Now he’s using his insider knowledge to create a new company called Tokken.
Tokken is a software app that could allow dispensaries to digitally track every single transaction. Basically, every time a dispensary sold something, it would be linked to a tiny Bitcoin transaction.
All Bitcoin transactions are permanently recorded in a digital record called a blockchain. By linking in-store activity to a blockchain, Tokken would help dispensaries create an official record of everything they do.
This, Zarrad said, might help banks begin trusting dispensaries enough to let them start opening accounts.
Another tech-based startup trying to solve the banking problem is Hypur.
This company has created software that uses GPS to “geo-locate” every purchase made in a dispensary. Like Tokken, the hope is that this will help banks trust dispensaries more.
Taking a different approach, the techies at Kind Financial have invented kiosks to put inside dispensaries.
Anytime somebody buys something, they deposit money directly into the kiosk. The kiosk’s software would then keep tabs on all transactions.
Startups like these have gained some attention in the cannabis industry. And some of them have started receiving significant investments.
But the biggest concern is still the fact that cannabis is illegal at the federal level.
It remains to be seen if the solutions these companies have come up with will be enough to ease banks’ concerns about federal marijuana laws.