Can cryptocurrencies like Bitcoin hold the key to cannabis industry’s financial security?
By Art Cosgrove
The rise of cryptocurrencies, blockchains and other new technologies has presented everyone with new, challenging opportunities. From financial institutions to retailers, pretty much everyone is now interested in Bitcoin (and the ever-growing web of other cryptocurrencies).
Of all sectors that seem destined to forge links with digital currencies, the cannabis industry may be the most intriguing, possessing the most possibility. It’s the Wild West out there — both for cannabis and cryptocurrencies. So why aren’t the pioneers of the crop flocking to the use coffers of the network?
One of the key obstacles to the growth and sustainability of the recreational and medical cannabis markets is the fact that most banks won’t touch any money generated by marijuana. Due to its continued federal illegality, banks can neither insure the funds, nor be certain they won’t wake up one morning to sounds of the Drug Enforcement Agency’s battering rams at their doors. So everyone in the weed business, from producers to retailers, find themselves — sometimes almost literally — sitting on piles of cash.
It stands to reason that these marijuana businesses would want to convert their cash into a currency they can store anywhere, one that is highly (theoretically) secure, anonymous and can be moved with minimal fees. Most cannabis entrepreneurs are discouraged, however, from rolling the dice amid two major concerns: ease of access and volatility.
Ease of access is probably the hardest part for some to grasp. For those born in the Internet era, digital currencies may make all the sense in the world. But for many, concepts of the blockchain, proof-of-work, hash rates and everything else that goes along with cryptos are incredibly difficult to understand, and thus dubious repositories for one’s livelihood.
More practically, many consumers don’t even know how to get their hands on cryptocurrencies. In major metropolitan areas, Bitcoin ATMs are popping up — portals to buying and selling for cold, hard cash. But rural Oregon (not to mention most of the country) still lacks an easy way to turn cash into cryptos.
To fill this void, several cryptos have popped up specifically aimed at catering to the marijuana industry. PotCoin, DopeCoin, CannaCoin and HashCoin are just some of the bigger players in this space. It remains unclear how these marijuana-centric cryptos truly differ from Bitcoin, Ethereum or any of the other big names. And without widespread access to modes of converting cash to cryptos, these marijuana-industry currencies will remain on the periphery.
But the biggest obstacle to this potential match made in heaven is the fierce volatility of crypto markets.
“I really like the idea of cryptocurrency,” says Curt Marsden, owner of Ridgeback Cannabis near Sandy. “A lot of new technologies are slow at first, and then they really ramp up.
“I think it will take off at some point,” he says, “but Bitcoin’s value is highly volatile.”
Bitcoin isn’t the only one. Pretty much all cryptos have been on a roller-coaster ride over the past couple of years. In January 2016, PotCoin was valued at an almost nonexistent five ten-thousandths of a dollar (that’s $.0005). Two years later, the crypto peaked at 42 cents per coin before losing over half its value to 20 cents at the time of this article’s writing.
“I’m one of the growers who does have a bank account in Oregon,” says Marsden, noting he’s one of the lucky few. His account costs over $500 a month in fees just to have, and he’s contractually prevented from saying which bank he uses.
With few banks nationwide that will deal with medical growers and almost none that will deal with recreational, there are obvious possibilities. But Marsden says he won’t venture into any cryptocurrencies until things stabilize pricewise.
Others are ready to roll the dice. Jeff James, a grower and retailer based out of Boring, is betting heavy on a variety of cryptocurrencies.
“I even posted ads all over offering to trade cannabis for Bitcoin. No takers,” says James, noting he’s one of the few producers in the state who will accept Bitcoin for cannabis, though he thinks that soon will change. One of the markets he keeps an eye on is China, where there is a hotbed of new activity.
“The Chinese Central Bank is going to be launching their ‘Internet of things,’ called IoT, which aims to create a neural network of technology,” says James. “The short version is that I’m long on IOTA, Ripple and several other cryptocurrencies,” all of which James expects to skyrocket over the long term and eventually stabilize.
“It’s like you just threw a giant rock in a pond and it’s all … wavy,” says James. “But eventually, it will calm down.”