Everyone has heard of Bitcoin, but what about a cannabis version of Bitcoin? Essentially, Bitcoin is a digital form of money that goes by the more technical name “cryptocurrency.” It sounds like something out of an eighties hacker movie. And it kind of is. Simply put, cryptocurrency is digital cash. Except, it’s also totally cash-less because everything happens online. And that’s the draw for legal weed businesses in the US. Cannabis cryptocurrency would make banking available to companies that don’t have access to federal banks. But will cannabis cryptocurrency ever get off the ground? A survey of the investment landscape yields some interesting ideas.
Why Do Weed Businesses Need Cannabis Cryptocurrency?
The legal cannabis industry has a problem. A cash problem, to be exact. Due to the ongoing federal ban on marijuana as a Schedule I narcotic, federally-insured banks can’t legally conduct business with weed companies.
The banking issue has been one of the major stumbling blocks for fledgling cannabis businesses. Finding themselves in the risky situation of having mountains of cash on hand, states have been scrambling for a solution.
One such solution involves issuing a cannabis cryptocurrency on the model of Bitcoin. No government or centralized entity controls cryptocurrency. And this feature could help weed businesses get around a number of restrictions.
How Would A Cannabis Cryptocurrency Work?
While many people have heard of Bitcoin, few have dug into the inner workings of cryptocurrency. But major banks and governments are keeping a close watch on its developments.
Digital cash immune to central control could topple the system of banking that puts power in the hands of a few. There’s lots of details into how digital currencies work, but here are the essential things to know.
Cryptocurrency is free from any and all government oversight. Instead, a completely encrypted peer-to-peer network monitors the currency’s economy. Each and every transaction, as well as the balance of every account, is public on the network.
Cryptocurrency changes are possible because every transaction is irreversible once a “miner” confirms it. And all transactions enter a database called a blockchain.
But perhaps the most important part of cryptocurrency is that it is permissionless. Everyone can receive and send cryptocurrency, and no one can stop a transaction. This makes it possible to exchange Bitcoin anywhere and with anyone in the world.
Whether cannabis businesses adopt one of the already-existing cryptocurrency standards, like Bitcoin, or create their own, cannabis cryptocurrency could play a vital role in the cannabis economy.
On the other hand, it’s also true that the irreversible nature of these types of transactions exposes companies to some serious risks.
Will Cannabis Cryptocurrency Ever Get Off The Ground?
Whether or not cannabis cryptocurrency ever gets off the ground in a significant way remains to be seen. But there have certainly been some early forays into the market.
Rapper The Game is making moves to market a Bitcoin-type currency for weed called Paragon coin. And then there’s PotCoin, a Bitcoin-based cannabis cryptocurrency solely for facilitating transactions in the legal cannabis industry.
Other start-up companies are working on linking cannabis and cryptocurrency in a variety of ways. Some are offering cannabis storefronts consumer payments options, while others are working on giving weed companies ways to conduct non-cash transactions.
Undeniably, there is serious hype around both the multi-billion dollar legal cannabis market in the US and the skyrocketing value of Bitcoin.
But some legal experts advise caution. In the first place, they argue, the Securities and Exchange Commission (SEC) is trying to find a way to bring cryptocurrency under its control.
Dozens of enforcement actions are also pending against people issuing coins. Secondly, small start-up cryptocurrencies appear, flare up, then die all the time, leaving investors stranded with worthless coins.
Investors even have a name for it. They call it “pump and dump,” which is the process of rapidly inflating the value of a cryptocurrency only to sell all of it off, plummeting its worth.
Finally, the totally unregulated nature of these digital currencies leaves consumers and investors vulnerable to fraud.
Final Hit: What’s The Future of Cannabis Cryptocurrency?
“Legal cannabis” remains somewhat of an oxymoron. Because while states may have legalized weed, everyone buying selling and consuming cannabis there is breaking federal law.
Cannabis cryptocurrency may help state-legal marijuana businesses get around some of the major obstacles of federal prohibition. But it can’t reverse the federal ban.
Ultimately, one of—if not the most exciting aspects about cannabis cryptocurrency in the current situation is that the identities of everyone using it would be protected.
The “decentralized,” peer-to-peer nature of the economy plus advanced encryption technology keeps personal info safe. Considering all that it has to offer, cannabis cryptocurrency is definitely going to stick around.