On The (Not So Green) Hill
Crypto and cannabis have always been kindred industries. They both operate within a grey zone of a complex economy-legality dichotomy. Cannabis is currently legal for recreational use in 18 states and medical use in 38 states and Washington, DC., but is still illegal at the federal level. On the other hand, Crypto is not currently accepted as legal tender. However, companies are now required to report crypto payments of $10,000 or more to the Internal Revenue Service (IRS) in accordance with President Biden's Infrastructure Law.
Business owners with the drive, passion, and funding to navigate the murky legal patchwork required to open and maintain a profitable cannabis dispensary are often subjected to meticulously scrutinized payment and tax speculation by the IRS.
The U.S. Treasury Department recently issued a report to discourage companies that accept crypto transactions from facilitating “illegal activity broadly, including tax evasion.” And at the end of 2021, the Secure and Fair Enforcement (SAFE) Banking Act was excluded from a groundbreaking Senate-passed defense spending bill, which made it nearly impossible to reform existing, outdated cannabis laws, completely barring the industry from access to the use of federal banking services for legal, cannabis-related businesses, including payment processing, business loans, and secure holdings, among other services.
These government regulations prevent dispensaries from thriving. Banks won’t permit credit and debit transactions for cannabis-related goods and services, and dispensaries avoid cash payments for fear of federal-level accusations of illegal or suspicious business practices.
Other Side of the Coin
The blockchain provides the cannabis industry with transparency and security not provided by the traditional banking system. Dispensaries can process payments without high service fees from third-party processors and rely on the public ledger and crypto wallets to ensure accurate reporting.
Dispensaries such as The People’s Remedy, Crypto Cannabis Club, and D8 Holdings are already accepting cryptos like Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Some cannabis businesses are even incorporating cannabis NFTs into their crypto-powered purchasing options.
As crypto’s overall value rises and the world faces staggering inflation rates, customers are looking to purchase tangible goods and services with their crypto assets. Crypto transactions make paying for cannabis goods and services more accessible, as anyone with a smartphone can make a low-cost transaction.
Most dispensaries are not yet accepting crypto payments. However, services like SpeedWeed – which facilitates cannabis deliveries from a wide range of dispensaries – act as a third-party service providers, allowing dispensaries to benefit from customers' crypto transactions without implementing crypto infrastructure themselves.
SpeedWeed services dispensaries that may be hesitant to accept crypto transactions directly. However, a growing number of third-party payment solution providers, such as RocketFuel and Paybotic, are making it easier for dispensaries to directly accept crypto transactions, especially as dispensaries expand their delivery offerings in response to online purchase options.
After dispensaries select a trusted crypto payment service provider, the process for payment transactions between customers and dispensaries follows:
- Customers are prompted to select a payment option.
- Once a customer selects crypto, the payment platform provides its most up-to-date market value of the crypto-equivalent value in relation to the local currency and the price of the purchased product or service.
- The payment is then instantly sent to the merchant dispensary.
- Later, that payment can be converted to another form of crypto, stored in a crypto wallet, or converted into local currency and transferred into a bank account.
These transaction times are often comparable to making credit card or debit card payments.
But legally accepted crypto transactions are still a new global concept, and consumer demand for this service is relatively low. Furthermore, crypto is still very volatile. Most customers can’t adjust to coin value changes of thousands of dollars over a single month, as seen by Bitcoin in 2020 and 2021.
However, the need for dispensaries to adopt safe and reliable payment solution alternatives to federally backed banking services may be enough to drive industry-level crypto payment acceptance.
The potential for crypto transactions becoming accepted forms of payments is high, and the barriers to entry are almost non-existent for businesses across every industry. In recent years, the travel and fast-food industries – Burger King included – have already begun to adopt crypto payment solutions, which drive public perception.
The low-risk appeal affords easy and cost-effective customer testing without the need to replace traditional payment methods or increase spending.
For businesses thinking of integrating crypto payment solutions, there is no better time to do it than now.