The legal marijuana industry has grown rapidly in the U.S., with 38 states, three territories, and the District of Columbia legalizing its use for medical and/or recreational purposes. However, despite the industry’s growth, marijuana businesses continue to face significant challenges with payment processing and banking, primarily due to the federal prohibition of marijuana. This conflict between federal and state laws has led to an exploration of alternative financial systems, including the use of cryptocurrencies.[1]
The Banking Challenge for Marijuana Retailers
The primary challenge for marijuana retailers is the inaccessibility of traditional banking services. Despite the state-level legalization of marijuana, the substance remains illegal under the Controlled Substances Act, 21 U.S.C. § 801, et seq., meaning that banks who provide services to marijuana businesses could be perceived as violating anti-money laundering laws.
While federal regulators have issued guidance clarifying how financial institutions can permissibly service marijuana businesses, many financial institutions remain hesitant, primarily due to the lack of complete assurance of protection from the federal government, as well as from the increased administration and oversight required to bank marijuana businesses. Moreover, for the financial institutions who do bank marijuana businesses, the costs of these services can be prohibitive.
The final result