Until recently, Bitcoin seemed to be a stagnant concept, something not capable of taking off. It wasn’t really all that surprising: people weren’t rushing online to buy stock in crazy made-up internet money? Shocker! However, 2017 appears to have been Bitcoin’s year. If only Doc Brown would lend us his time machine so we could all back to 2016 and invest a paycheck or twenty.
For those who work in the cannabis industry, Bitcoin’s rise to power is of particular interest; it provides an alternative to cash, allowing dispensaries to do business without a bunch of Benjamins
As everyone in the industry is well aware, cannabis is cash-based; not only do dispensaries require customers to buy with cash (though some do allow credit cards through creative means), but they also work outside of banks. The reason is because of Uncle Sam (he’s not the fun uncle who will get drunk and do the Electric Slide at your wedding). This leaves banks afraid to back any sort of marijuana entity: hopefully, you don’t need a loan, because Guarantee Banking is guaranteed to say no.
Dealing in cash isn’t ideal. It handcuffs people who want to join the business but don’t have the means, for one thing. But store owners and managers already in the industry don’t like it either. It’s a hassle, it’s messy, and it makes those involved sitting ducks for robbery.
Bitcoin and Cannabis, Best Friends
We’ve heard about Bitcoin – it’s dominated the headlines in recent months, it’s circulated around tech and economic circles, and certain people’s husbands (ahem, me) won’t shut up about it. But what is it, really?
Per CNN, “Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middlemen – meaning, no banks! Bitcoin can be used to book hotels on Expedia, shop for furniture on Overstock and buy Xbox games. But much of the hype is about getting rich by trading it. The price of Bitcoin skyrocketed into the thousands in 2017.”
One of the advantages of Bitcoin is that it allows people to purchase things anonymously (which begs the question, what exactly are people buying?). Another huge benefit is that it’s not tied to a single nation, which means it doesn’t have to go through any regulatory red tape – this makes payments and purchases outside of the country easy. There aren’t any credit card fees either, which is the reason some people use it. Others simply buy it as an investment and hope it’ll go up.
If you were one of those with foresight, congratulations, you were right
Bitcoin can be purchased or sold via “exchanges” and using a variety of currencies. Once you buy it, the coins are stored inside a digital wallet – this exists either inside your computer or on the “cloud” that no one in the world understands how to use.
As one might guess with digital currency, there is risk involved. Hackers are one of the bigger concerns – early this month, hackers stole 70 million dollars worth of Bitcoin from a cryptocurrency mining service. Bitcoin, because it’s not regulated or overseen by a government entity (though some countries are considering doing this), is not insured – something else that causes concern for those who are down with the FDIC.
Which brings us to pot…….
With banks telling Mary Jane that they don’t want any, dispensaries are looking for an alternative (and hoping to ditch the cash-only game). Enter Bitcoin
According to Bloomberg, cannabis is getting in on the digital currency game.
Something has to give, of course – marijuana is already a lucrative business: in 2016, it was a 6-billion-dollar industry. In 2026, it’s predicted to breach the 50 -billion-dollar mark. This will make the logistics even more complicated than they already are and up the need for hardcore security. But it will continue to allow dispensary owners to dive into vaults of dollar bills in an always poignant tribute to Scrooge McDuck.
Other Non-Cash Solutions
Some cannabis companies have turned towards placed like POSaBIT, a financial startup that utilized cryptocurrency to give those in the marijuana marketplace an alternative to cash.
Presently, around 30 dispensaries in Washington State use POSaBIT to manage their “cash” flow
One of the reasons for its popularity is the issue of security discussed above. Jon Baugher, the co-founder of POSaBIT, went on record to say, “There’s no industry – whether it’s the production and sale of cannabis or the production and sale of a cup of coffee – that can operate safely, transparently, or effectively without access to banks or other financial institutions and traditional services. That’s where we thought we could leverage the use of digital currency.”
Trove Cannabis, which is among the POSaBIT customers, waited six months to become a consumer, something the company did after selling 3 million worth of pot (in cash, mind you) during 2016. Partnering with POSaBIT allows customers to pay with credit or debit, something – per Trove’s founder and CEO Yin-Ho Lai – that about thirteen percent of customers choose to do. A benefit for the business? Those who use cards tend to spend more.
The process is pretty simple. First, each customer is given the option of paying with cash or digital currency. If they choose the second option, the customer uses their credit card to buy Bitcoin through a POSaBIT kiosk (with a two-dollar transaction fee, which is lower than most ATM surcharges).
The customer then owns Bitcoin equal to whatever value they just purchased. This can then be redeemed for products in the store (or anywhere else Bitcoin is accepted). If the customer purchases something from the dispensary, POSaBIT pockets the two-dollar transaction fee then sends the value of the purchase to the dispensary’s bank account.
This doesn’t mean digital currency is the next VISA (Bitcoin: it’s everywhere you want to be), but it just may be the future of weed.