Blockchain Startups Want to Solve Cannabis' Banking Problem

As IBM, JP Morgan, Intel and Bank of America experiment with Bitcoin-inspired finance, blockchain startups do the same for weed.

Blockchain Startups Want to Solve Cannabis' Banking Problem

Bitcoin's already fueled the dark web, where drugs and illicit goods are the norm. But, the blockchain technology on which Bitcoin is based, say many enthusiasts, could bring needed transparency to cannabis payments.

Industry insiders estimate approximately 15% of cannabis businesses have a bank account with a traditional financial institution, while most others operate with the risk of running an all cash business. Entrepreneur’s in distributed finance contend there’s another option.

“The blockchain’s ledger is a great communication tool for regulators,” Tokken founder, and former regulator, Lamine Zarrad told MERRY JANE. “If we can transfer the cash flow to an electronic format, you eliminate most the risk of money laundering.” 

Tokken, a “blockchain agnostic” startup whose executives have decades of experience working in government, uses cutting edge technologies to usher in an era of distributed and digital payments in the cannabis industry. 

Tokken’s core business is providing sustainable and transparent solutions in the cannabis industry using blockchain technology.  Working with companies like Blockscore and Tierion, Tokken believes blockchain technology will allow the cannabis industry to flourish. 

Defunct California dispensary, Trees, made headlines last year when it announced it’d like to deliver marijuana by drone. 

Once having offered a luxurious cannabis kit including vaporizers, dabs and other medical cannabis products with Trees, founder Marshall Hayner believes Bitcoin is exactly what the cannabis industry needs.

“There is going to be a change in the banking industry,” Hayner told MERRY JANE. “It’s hard for banks and consumer behavior to change overnight. And, cannabis is still a gray market without banking partners and processing partners. So, the technology to solve this problem is quietly growing in the background. You won’t need to have a bank account.” You can be your own bank, and you can hedge crypto-currencies through the US dollar or Chinese Yen, Hayner adds.

Another startup, CHEX, wants to create a formal exchange for cannabis related products, including ticker symbols representing a specific cannabis commodity. “Processors of cannabis infused products, such as edibles, could use more commodity sourcing options, for sourcing commodities like flower, trim, oil, and dispensaries as wholesale buyers could use more options and suppliers of their product,” Eugene Lopin, CHEX co-founder, told MERRY JANE. An exchange would go a long way towards promoting regulatory compliance in the cannabis industry, Lopin reasons. 

Cannabis and blockchain have yet to embrace each other as compatible industries. 

“The bitcoin community is apprehensive in extending its services or creating affiliations with cannabis, because bitcoiners don’t want to be predominantly stereotyped by the Silk Road,” Zarrad, a former regulator within the Treasury Department,  told MERRY JANE, referencing the darknet marketplace where cannabis traded hands over bitcoin while oft using public mail services. "And the cannabis industry feels the same way about associating itself with bitcoin."

Written on September 26, 2016 by

Justin O'Connell

Justin is a California-based writer who covers music, cannabis, craft beer, Baja California, science and technology. His writing has appeared in VICE and the San Diego Reader.