As the legalized cannabis industry continues to grow, there is a need for a more efficient and secure way to handle transactions between businesses and consumers. Cryptocurrency has shown to be a viable option for this and could eventually replace traditional banking methods in the cannabis industry.
Why? Despite continued legalization across the U.S. and exponential growth expected to surpass $35 billion by 2025, traditional banks aren’t capitalizing on cannabis growth due to tight federal regulations.
So, is cryptocurrency the excellent option it seems for cannabis companies looking for innovative ways to streamline their finances?
Read more about the Banking Dilemma for Cannabis Businesses
Blockchain’s lack of third parties reduces processing fees and increases the transaction speed in a rapidly evolving industry and no federal bank transaction securities. So why not?
Cryptocurrency is a virtual currency that mediates transactions between two parties using technology known as Blockchain. The technology uses cryptography to verify and then secure these transactions. It also controls the number of units created in a particular cryptocurrency.
As a result, Blockchain transactions in the cannabis industry are easy and fast. Cannabis businesses with no access to bank services also find it easier to make transactions using cannabis-specific virtual currencies and sometimes bitcoin.
Bitcoin is the first and most well-known cryptocurrency, but there are now many different types available. Cryptocurrency is not regulated by any government, which makes it an attractive option for businesses in the cannabis industry that often operate in a legal gray area.
Currently, different cryptocurrencies facilitate transactions in the cannabis industry which include:
Cryptocurrency can be used to pay for goods and services, and can also be exchanged for traditional currency. This makes it a more efficient way to handle transactions than traditional banking methods, which can often be slow and cumbersome. Cryptocurrency can also be used to pay employees and suppliers, and to fund new businesses.
As the cannabis industry continues to grow, it is likely that cryptocurrency will become even more popular as a way to handle transactions.
Here are some other advantages to using cryptocurrency for cannabis companies:
Cryptocurrency is a virtual currency that doesn’t require bank approval. As a result, cannabis businesses can comfortably use digital currency to make transactions, regardless of the many cannabis restrictions, volatility, and tax issues.
Frustrated by limited banking options? See our post in the National Cannabis Industry Association Blog: Banking Reform For Cannabis Operators
Additionally, banks are prone to freezing cannabis business accounts, which can cause significant and sudden financial losses for these businesses. But cryptocurrency eliminates the third party in the transaction process, which safeguards cannabis businesses from the usual and unexpected bank hassles.
One of the most significant advantages of using cryptocurrency for cannabis companies is that it is currently the most secure payment system. Unlike banks and cash-only transactions, cryptocurrency has never been hacked.
A common concern many cannabis consumers have is privacy. Cryptocurrency takes care of this by ensuring transactions and accounts remain anonymous upon customer request.
Therefore, any payments made through the crypto wallets remain safe and secure. Cryptocurrency also protects cannabis companies’ data from fraud or theft since blockchain technology ensures that transactions are permanent and cannot be changed or altered.
You can gain more transparency when managing the seed-to-sale process by incorporating your cryptocurrency and blockchain technology into your cannabis ERP system. This allows any transaction to be easily verified on any computing device.
Cryptocurrency is a global virtual currency that eliminates location-based restrictions and opens the market for online payment processing. As a result, cannabis businesses can take their offerings online. This also removes the tax requirement often placed on some location-based transactions.
Cannabis customers wary of using banks for cannabis payments or cash-only transactions can now turn to cryptocurrency for purchases through seed-to-sale software. This, in turn, has increased the customer base for cannabis businesses, whether they are in retail, extraction, distribution, or cultivation.
All the customer needs is an email address and access to an internet-enabled device. Cryptocurrency also presents the opportunity for cannabis businesses to reach international customers because of the availability of online payment processing.
Crypto is volatile, meaning its future is uncertain. As a result, it can be a risky investment, especially among customers who are sensitive to prices. Another disadvantage of using cryptocurrency for cannabis businesses is that it needs a big commitment.
Since many people still prefer traditional payment transaction methods like banks, the cost of adopting cryptocurrency might be too high. It is also uncertain whether or not cryptocurrencies could experience regulations in the future.
There is also an expectation that the federal government will rally in support of blockchain technology for cannabis businesses. However, using digital currency might undermine the legitimate aspect of the legal cannabis industry because the crypto industry is also federally unregulated.
As the cannabis industry continues to grow, it is likely that cryptocurrency will become even more popular as a way to handle transactions. Traditional banking systems might be changing, but they are not remotely ready to take on the full implications of supporting the federally illegal cannabis industry.
Blockchain can streamline the authentication, compliance, and other regulatory procedures required in the industry. As a result, cryptocurrency is indeed a viable banking solution for cannabis businesses.
Crypto is still an evolving technology that needs careful consideration prior to business implementation so cannabis businesses should explore all of their options when it comes to banking.
Granted, cryptocurrency offers financial benefits to cannabis businesses like reducing transaction fees, eliminating third parties like banks, and increasing speed in payment processing. However, the adoption and implementation of cryptocurrency for cannabis businesses depend on the needs of every cannabis business.
Cannabis companies that use cryptocurrency experience fewer financial hassles like getting approval for every transaction and increased customer access and online payment processing. Blockchain and cryptocurrency are more secure, private, and transparent than other currency options.
Yes, the cryptocurrency industry is very volatile, meaning the future of using the technology for financial transactions is unpredictable.