In 2012, when Colorado and Washington legalized marijuana for recreational use, the whole cannabis community celebrated the beginning of the end of pot prohibition. Something many people wanted to see had finally happened, but while many entrepreneurs have joined the Green Rush, they have encountered more challenges and business hurdles than most expected. One of the biggest issues facing the budding industry is the lack of traditional payment methods for buying cannabis at legal pot shops.
At the same time that we as a society are transitioning to a cashless society — legal cannabis remains primarily an all-cash business. Cash the only form of currency accepted at most dispensaries and legal cannabis stores as marijuana remains federally illegal as a schedule 1 controlled substance. This makes it harder for banks to accept any money coming from cannabis entities — even in legal states.
The $10 billion legal US marijuana industry has taken it upon themselves to expand their payment methods. Two cash alternatives that are increasingly being used are cryptocurrencies and loaded debit cards.
Cryptocurrencies in Dispensaries
Bitcoin, the first digital currency came out in 2009 and the technology has been improving ever since. Since then several cannabis specific cryptocurrencies have been released. Among those making headlines:
Bitcoin: Bitcoin had a great run in 2017 and that is a partial reason why people are not looking to spend any. Everyone is hoarding their Bitcoins hoping the price is going to go up again. Besides that, Bitcoin is not meant to be an everyday currency. It is more of a store of wealth since transaction fees have become too expensive. However, some places are creating their own tokens which can be traded with Bitcoin.
A dispensary in San Diego called Medicine Man Club created what people call, “a country club for marijuana.” They created a token called Medicine Man Token (MMT) and they use it for everything inside the marijuana events space, almost like Dave and Busters or Chuck E. Cheese. Instead of walking up to the arcade games and putting in quarters, you use the specific tokens. You use the tokens to buy cannabis and other related products. The Medicine Man Tokens can be purchased with cash, Potcoin or Bitcoin.
Potcoin: One of the most used cyber currencies inside dispensaries is Potcoin. It enjoyed first-mover advantage, and it is being marketed brilliantly, with a mobile app that is easy to pay inside the shop with a QR code. According to Potcoins blockchain explorer, there are new transactions happening every couple of minutes.
Reasons it Won’t Work
Cryptocurrencies offer many benefits for dispensaries, including giving customers the option to pay more freely, but it does come with its own set of problems. Zachary Zises, a Chicago dispensary owner said, “We have too many strict state and federal standards to meet, and right now, the cryptocurrencies don’t allow us to meet those high standards.” Matt Karnes, founder of GreenWave Advisors agrees, “Because cryptocurrencies are so controversial, we believe its use raises added concern for the cannabis industry, which already faces its own unique challenges for banking and do not consider it a viable option at this point in time.”
Since cryptocurrencies have not gone through mass adoption, it is hard for many people to use them for now. Many still prefer debit cards, so it is not surprising to pre-loaded debit cards being adopted as an alternative to relying on fee-heavy ATMs to make cannabis purchases.
CanPay: Dubbed as the “first legitimate debit payment system for cannabis purchases,” CanPay is making it easier to buy your favorite strain. Tim Cullen, who owns Colorado Harvest Company said, “CanPay solves one of these pain points for us as a business.” People are flocking to CanPay because of their low fees and they’re even confident they will have the lowest fee structure, even after Visa and Mastercard start doing business with dispensaries.
POSaBIT: This is a startup that lets people buy legal weed with their credit cards. It is in the form of a credit card but it is linked to your Bitcoin or Litecoin. POSaBIT works connecting the card to you Bitcoin or Litecoin wallet. When you want to buy your legal weed, you simply swipe the card which takes the money out from your crypto wallet. It is one of the most used alternative payments in the cannabis industry since it has processed over $2million worth of sales in 30 stores total since inception.
GreenMed: A very popular debit card is the GreenMed and the interesting part is it’s connected to the blockchain. Simply add your credit or debit card information to your account and Greenmed can be used to pay at dispensaries. All information is relayed back to the blockchain which gives you an open and transparent source to check all data of a purchase.
Alex has been very deep in the cryptocurrency space for the last 3 years soaking in everything there is to know. With such a new industry popping up, Alex is constantly sharing about the latest news and updates in cryptocurrencies on CoinPupil.