One of the biggest hurdles to implementing I-502 in Washington is banking:
Banks fall under the scrutiny of federal regulators such as the Federal Deposit Insurance Corp. And bankers fear punishment if their account holders violate anti-money laundering laws. I’ve also heard that banks are worried about pot-related businesses leasing out space in commercial real estate properties on which banks hold loans, which could limit where marijuana producers or retailers locate.
The pot industry’s banking dilemma is making it harder for state leaders to set up a legal pot industry in Washington. Scott Jarvis, director of Washington’s Department of Financial Institutions, recently went to Washington, D.C., and met with several federal banking regulators seeking clarity. Jarvis left without an answer.
This has long been a problem for medical marijuana businesses and is expected to be just as problematic for the new recreational marijuana businesses in both Washington and Colorado. With the emergence of bitcoins, however, does this provide a workable alternative?
Once considered a nutty idea favored by computer geeks and anti-government types, bitcoin is gaining traction as a legitimate way to buy and sell goods.
True believers say it’s the future of Internet commerce, where the world is united in a common digital currency rather than dollars, euros, yens, pounds or pesos.
Shorter term, bitcoin has become a scorching-hot commodity among speculators who are trading the virtual currency at a record clip in deals worth millions of actual dollars.
I don’t have any well-formed opinions yet about the bitcoin phenomenon, but I’m very curious whether this would be a feasible workaround to the banking problem. I guess the main obstacles would be getting enough customer acceptance and perhaps tracking and paying all the required business taxes, but I certainly haven’t thought this through. Your thoughts?
This would get bitcoin on the radar and regulated.
’cause nothing enhances the credibility of an industry like funny money.
@2
Whenever I seek out smart opinions on how to gain credibility, the first people I think to ask are dimwitted, right-wing trolls.
@1
I guess I could see that, although I tend to think that it would be the end of bitcoins. I think the whole point of it is that it’s a currency that’s unregulated by a government.
Again, I’m coming at this without any strong opinions about the future prospects of bitcoins in general. It may just be a fad that people consider to be too risky to invest any real wealth into. On the other hand, maybe it’ll gather enough popularity to self-sustain. I just don’t know. If I were a marijuana entrepreneur I’d probably be wary, but then again, that’s probably why I never gave up a very comfortable career in order to be a marijuana entrepreneur. :)
@ 2
Whenever I seek out smart opinions on how to gain credibility, the first people I think to ask are dimwitted, right-wing trolls.
And whenever I seek out ways to work around our existing currency system, rather than look at a fly-by-night concept in which the value of a coin fluctuates pretty wildly ($100-200 from what I read), I look at monetary systems that already exist and might be expanded outside their current use.
Like casino-denominated chips, for instance.
There might still be the federal v. state issues, and the BIA might have something to say about it, but having the marijuana industry hook up with an indian reservation or two is an idea.
They’re already into gaming, they already have deep pockets, stability, an existing currency (chips), and they also have plenty of land for operations like growing their own and providing a product pipeline to in-state consumers.
Or you can out and create your own currency. Darryl Doobie-bucks or something.
Ya know, with all that money Roger Rabbit tells us he makes on a daily basis, all of which is taken from those conservative rube investors, perhaps we should look to RR to bankroll a new currency.
We could call the denominations ‘pellets’.
@5
That doesn’t really solve the root problem. They could do everything in cash, but what they don’t want is large piles of physical money sitting around. It’s impractical and a theft target. Same problem if you use something like casino chips.
But I appreciate taking the discussion to an appropriate level and depth. Thank you.
Same problem if you use something like casino chips.
But not if you use something like a casino-issued value card. Think dining card at the college cafeteria. Money added externally, card value debited with each transaction. Indian nation issues the card, customer bank-transfers to card account, uses card to make purchases. Reduces the armed-robbery problem.
I know nothing about commerce law insofar as Indian nations are concerned (now realize I should have used a capital I in @ 5). But if there’s some sort of tobacco workaround for sales on Indian reservations….
# 8: The problem isn’t just getting money into the system- it’s also about getting the money out in cash which can be used to pay rent, wages, utilities, transportation, profits, etc. Casino chips, transaction cards, even Bitcoin have this same problem – if people don’t accept it as payment, it’s useless.
I’m old enough to remember when VISA and Mastercard were struggling to get merchants to accept their cards as payment for goods and services – there was a lot of reluctance in the 1960’s and early 1970’s, people trusted cash and checks, not plastic.
@ 9
I’m old enough to remember when VISA and Mastercard were struggling to get merchants to accept their cards as payment for goods and services…
In 1979, the first time gas prices surpassed a buck a gallon, the pumps weren’t able to go higher than 99.9 cents.
I got to be the guy who ran around the pumps all weekend handing out the little cards telling people that yes, they got their 10 gallons of gas, but that the cost would be $10.20 for it and not the $5.10 that showed up on the pump.
That took more convincing than getting people to use plastic.
Well, this is not an unsolvable problem. The federal government needs to finally realize that over 50% of us think marijuana should be legal.
Once they see how much tax revenue and jobs are in the marijuana business, they’ll probably jump on the band wagon.
@9
Yeah, I think this is the overriding point and where my biggest doubts come from.
Why Bitcoin? Any non-US currency from a county with relaxed rules about marijuana could be used.
@13
then you end up right where you started, only now having to face exchange rate losses. Might just as well use U.S. currency.
As Lee @7 pointed out, an all cash business is a train wreck.
And damn near impossible to insure. And even if you could insure it, what are you gonna pay your premiiums with, bags of quarters?
To conduct a multi-tiered industry with producers, processors, retailers, and ultimately retail customers, all engaging in transactions with each other, you need some kind of bank to clear all the transactions.This absence of basic banking services to the industry will make it almost impossible for small operators to participate. Likewise, traditional forms of business investment will have to remain on the sidelines, at least with respect to the elementsof the business that violate federal law.
What you need is a maven with a comprehensive grasp of commercial banking and banking regulations to figure out how to create a state-chartered “non-bank” to clear transactions and provide the minimum commercial services while somehow not breaching the regulatory threshold of being a federally regulated financial institution. Since the industry would have few other alternatives the fee structures might be quite attractive. And since nobody appears interested in this, we may assume that such an unregulated structure cannot be formed.
That’s a shame.
And maybe that’s the area of the law that needs to be worked on next.
@ 14
Since the industry would have few other alternatives the fee structures might be quite attractive. And since nobody appears interested in this, we may assume that such an unregulated structure cannot be formed.
That’s a shame.
That’s also incorrect. I’m sure organized crime is quite interested, and they’re as unregulated as anybody.
I did come up with one rationale for BitCoin investment.
When the Feds swoop in with warrants
http://horsesass.org/?p=49788#comment-1225225
and start confiscating the BitCoin assets from all you tokers, the ones still outstanding might be worth a little more.
Hey, it’s as reasonable as any of the financial advice offered by Roger Rabbit.