25 Jan Cannabis Cryptocurrencies Could Solve Marijuana Industry Banking Woes
Cryptocurrencies have taken the world by storm, with several cryptocurrencies breaking into the cannabis space to take advantage of what has largely become a cash industry.
The best known cryptocurrency is Bitcoin, but now there is also DopeCoin, CannabisCoin, and PotCoin. “Bitcoin and other cryptocurrencies surrounding legalized cannabis are driving the future of virtual currencies to higher levels than ever before,” said CEO of TD Ameritrade Tim Hockey.
There are more choices now in cannabis cryptocurrency than ever before, but what are they, how do they work, and are they legal for use in the U.S.?
What are Cannabis Cryptocurrencies?
Due to federal banking restrictions that limit the ability of the cannabis industry to access even basic banking services, most of the industry’s business – including retail sales, taxes, and payroll – is conducted using cash.
Starting in 2014, just two years into the passing of legal recreational marijuana in Colorado and Washington, cannabis cryptocurrencies were lauded as the solution to the cannabis industry’s banking woes. If marijuana sellers accept digital tokens instead of cash, they would not have the problem of having to store and transport large amounts of bulky cash.
Cryptocurrencies like PotCoin, CannabisCoin, DopeCoin, HempCoin (THC coin) and CannaCoin were all launched in 2014 before falling mostly into obscurity. Now, with the sudden booming growth of the cryptocurrency market, these cannabis coins are once again in the spotlight and are once again on an upward trajectory.
This boom might be tied to the fact that there are nine states, including California, with legal recreational marijuana laws. Despite this recent growth, most of these cryptocurrencies lack large number of users, limiting their usefulness.Once more merchants sign on to use currencies like PotCoin, DopeCoin, or HempCoin, their use may become more common.
What are Cryptocurrencies Used For?
Cannabis cryptocurrencies offer an alternative to cash for cannabis businesses and customers. Consumers can use virtual wallets and cryptocurrency to make purchases at marijuana dispensaries. However, these currencies can also be used by distributors, infused-product manufacturers, and even growers to keep from needing to handle large sums of cash.
Using PotWallet, consumers and other users can exchange PotCoins. The company doesn’t have a mobile app yet, but they say one is one the way. All PotWallet transactions are free, and nearly instant when compared to the long processing times of BitCoin and other currencies.
These cannabis cryptocurrencies fill a void in a marketplace currently dominated by cash and bring a level of safety to the cannabis market.
How to Get Them?
The purchasing process is similar for most cannabis cryptocurrencies. You must first download a digital wallet that will save your tokens and keep them safe. Then, you will match up with a seller through the currencies website and arrange a transaction.
As an example, PotCoins can be purchased online through the PotWallet website. Users on the site connect with a seller through the site’s marketplace. The purchaser sends the seller cash through the website or meets a local seller in person, and the seller releases the coins to the purchaser once they verify receipt of payment.
Once a user has a cannabis cryptocurrency, they can exchange them with other users for any good or service. For the cannabis industry, the hope is that these coins will replace the cash transactions that currently dominate the industry from the consumer to the grower and everyone in between.
Are Cannabis Cryptocurrencies Legal?
It is legal to own cryptocurrencies in the U.S., as well as use them to make purchases. Where legality comes into question is what is being purchased with the tokens. When these currencies are used to purchase marijuana, even at a state legal marijuana dispensary, it is against federal law.
Two currencies are taking very different approaches to this question of legality. PotCoin aims to be a transparent currency that can be traced and secured. This will help increase its credibility as a currency and perhaps make its use more popular. It’s possible to use PotCoin to buy illegal products, but its creators expect most users won’t do that due to the transparency built into the business model.
DopeCoin, which retains user privacy, was designed more for illicit purchases. The creators of DopeCoin hope to take cash out of the illegal drug trade, replacing it will untraceable cryptocurrency transactions.
DopeCoin and PotCoin presumably face the same risks of being prosecuted for money laundering as traditional banks do when servicing the cannabis industry, to the extent that are providing financial services and accepting funds from marijuana sellers.
Cryptocurrencies come with their own inherent risks for users, including the loss of tokens by users on unsecured exchanges. As public trust in cryptocurrency grows and more outlets begin accepting these currencies, there could be a rise in cannabis cryptocurrencies as the industry’s payment method of choice.