Cannabis-related businesses (CRBs) face specific financial and banking challenges that must be navigated within an increasingly complex regulatory landscape. As such, they require customized solutions in order to stay compliant and ensure regulatory compliance.
Spotting an opportunity, companies with expertise in banking services have emerged to provide innovative finance and banking offerings, providing CRBs with an easier, less risky, more cost-effective means of working with banks.
Cryptocurrency and Blockchain Applications
Cannabis-related businesses (CRBs) remain predominantly cash-based. While this helps mitigate risk and facilitate international transactions, complying with AML, BSA, KYC regulations can be costly and time consuming. Fintech companies have taken notice of this unmet need by creating innovative cryptocurrency-based systems that promise to transform supply chain management, compliance tracking and payment solutions for CRBs – with potential to transform the industry’s financial ecosystem.
As cannabis remains illegal under federal law, banks and credit card companies remain wary of working with its industry and many credit card companies will not provide services to cannabis businesses. Cryptocurrency- and blockchain-based solutions like Lightning network can provide an innovative solution by enabling cannabis businesses to conduct transactions using cryptographically secure digital tokens instead of physical cash – this reduces costs associated with transporting, settling revenue and secure its storage compared to using physical cash – while potentially persuading federal officials to de-risk banking institutions working with cannabis businesses and open an entirely new market of opportunity!
Non-Financial Transactions (NFTs) for Traceability
As cannabis companies expand, they are adopting various innovative financial management tools. One such example is seed-to-sale tracking systems which offer increased transparency and accountability across their supply chains, helping create greater responsibility while showing compliance with regulations reducing risks of illegal activity.
Non-fungible tokens (NFTs) have gained momentum in the cannabis industry for branding and marketing purposes, creating an exclusive experience and building brand loyalty with consumers. Furthermore, NFTs can also be used as rewards by rewarding loyal consumers with discounts or special event invitations.
Beird suggests that banks that specialize in cannabis invest in education to ensure their team has an in-depth knowledge of this complex industry.
Financing Options
Cannabis businesses historically had few options when it came to finding financing solutions. While banks may be unwilling to support this industry, other specialized financial institutions now provide cannabis operators with low-cost deposits, treasury management services and other banking solutions to expand their bottom line and increase profits.
Cannabis businesses need a secure place to store the cash they earn from sales, make tax and other payments electronically, as well as make employee direct deposit possible and gain other perks that come from having a strong banking relationship.
Without access to bank financing, cannabis businesses have often relied on private loan issuers that impose higher interest rates and stringent underwriting criteria as their financing source. Some have attempted to mislead banks into thinking their business is legitimate by creating false business names; this often only works until bank officials discover the true nature of the operation. Sale-leaseback deals may also provide access to financing; assets sold off and then leased back are another method that can provide essential financing solutions for continued operations.
Payment Solutions
Cannabis businesses face difficulties accessing financial services — such as loans and payment processing solutions from conventional banks due to federal rules regarding anti-money laundering, suspicious activity reporting and customer identification programs (KYC).
Cannabis businesses that depend solely on cash for transactions may face security risks and operational inefficiencies; however, fintech companies with cannabis expertise have developed solutions designed specifically for cannabis enterprises to handle payment processes more efficiently and empower their operations.
These solutions allow cannabis consumers to pay for products through digital payment options like QR code scanning at dispensaries or website payments, while retailers are able to more accurately track inventory while also avoiding compliance issues.
Before major banking reform is implemented at a federal level, innovative solutions will remain key components of banking industry success. But changing regulations could impede their effectiveness; to stay abreast of such policy developments is therefore paramount to effective solutions being provided to clients.