The 21st century has given us innovations we never thought were possible, and revolutions we never thought we would witness in our lifetimes. Two of the dominant industries of our modern world are cryptocurrency and cannabis, each edgy in their own right while demonstrating a rapidly evolving society. And, as it turns out, these two industries share quite a surprising overlap that’s becoming increasingly clear as time goes on.
Cannabis entrepreneurs are no stranger to the financial hurdles of maintaining a legal and profitable operation. Even those selling CBD, a federally legal compound from the hemp plant, can have a hard time finding the financial backing that they need in order to operate smoothly and profitably. But, with changing cannabis laws coupled with quickly evolving cryptocurrency markets, it is becoming clear that cryptocurrency may act as the knight in shining armor for cannabis brands trying to get their well-deserved piece of the pie.
Payment Processing in the World of Cannabis
The cannabis industry is fully aware of the challenges of finding payment processors and other financial backers. Hemp was legalized back in 2018, meaning that CBD products could be sold legally, and directly between businesses and consumers. This led to a rush of entrepreneurs launching hemp companies both online and in local retail stores, in order to satisfy a rapidly growing demand for quality cannabidiol goods after a string of positive studies confirmed the unique properties of hemp, that could be quite useful to people of all ages.
But, finding a payment processor has been difficult for these companies, as the industry is still considered too “high-risk.” More conventional payment processors have strict demands of their CBD clients, requiring extremely careful wording for products as to not promote potential medicinal benefits, banning certain words and advertising methods to force them into compliance. More commercial payment processors simply won’t work with hemp companies, period, despite the legal status of the products that these companies sell. And, just one complaint from a customer can cause a payment processor company to withdraw completely, effectively shutting down an otherwise thriving and legitimate business.
All that doesn’t even cover the complications associated with selling marijuana. As legalization is coming to more and more states, businesses can legally sell marijuana products to local customers. While marijuana still cannot be shipped across state lines, marijuana businesses have the ability to be extremely profitable in their neighborhoods due to increasing demand as a result of recent changes in cannabis laws.
But, even these legitimate, licensed businesses are struggling to find financial backing in the form of third-party payment processing companies, who again view the endeavor as too risky for them and can withdraw at any time.
Financial companies that do collaborate with cannabis brands tend to charge very high prices, taking more of a cut per sale than they do with other, less controversial industries. This makes it difficult for cannabis companies to come up with pricing that reflects their needs to remain afloat while still satisfying customers’ budgets and remaining competitive. Most payment processors take 4 to 6% of sales from cannabis companies, both selling marijuana and hemp goods, which is about 3 times the standard amount for other types of products.
Cryptocurrency in the Cannabis Market
One way for these companies to sidestep the complication of third-party payment processors is to accept cryptocurrency, which is becoming a more and more common way to make online payments. Cryptocurrency is not regulated by a third party like online credit card payments, thus eliminating the middleman while leaving both customer and business owner happy. Bitcoin emerged in 2009, right around the same time that the CBD industry was first beginning to make its presence known to the world, 9 years prior to full legalization on a federal level.
With cryptocurrency options, businesses can’t have their accounts frozen or shut down, and don’t have to pay high fees just to sell their legal products to consumers. In short, it allows business owners to operate in a way that doesn’t leave them at the mercy of finicky banks that are already inclined to have a prejudice against cannabis companies.
Cryptocurrency has been tied to cannabis for years, and not always in ways that were out in the open. Cryptocurrency like Bitcoin reigned supreme on the dark web, where users could, with a little bit of technological know-how, purchase marijuana using these forms of currency, and have it shipped to their home. Of course, this avenue was and still is completely illegal, and it’s risky. It also just proves that cannabis consumers are generally quite comfortable using this form of currency to satisfy their cannabis needs.
One thing worth noting is that cryptocurrency is still not as mainstream as many would like it to be. Due to its high-tech associations and constantly-changing value, it can leave out certain generations who aren’t as tech savvy, as well as those who are simply more cautious with their finances, as well as those who can’t be bothered with the ups and downs of the crypto market. But, like cannabis, this industry is expected to grow quickly in the coming years and will almost certainly become more mainstream well before the end of the decade.
The End of Cannabis Criminalization: Perfect Timing for Crypto Enthusiasts?
Finally, there’s a conversation in Washington about ending cannabis criminalization forever, largely headed by Senator Chuck Schumer. With so many states legalizing cannabis as a whole, it’s becoming clear to federal legislators that it’s only a matter of time before they’ll have to give in, as public opinion clearly illustrates a desire for legal weed.
What this means is that there could, in just a few years or even sooner, be a huge boom in marijuana sales both within and across state lines. Undoubtedly, there will be both emerging cannabis businesses in towns across the country, and an online marketplace like we have never seen.
But, as we have witnessed with the legalization of hemp, legal weed does not mean that payment processors will make things easy for business owners. That’s where cryptocurrency comes in. It can act as a direct payment line between businesses and customers, so that companies do not need to rely on payment processors and banks who simply make matters more complicated than they need to be. If weed becomes legal to the point that online companies can thrive, selling to states around the country, there is no doubt that adopting cryptocurrency as a revenue source will be advantageous. It will boost their profits and make their operations more secure as they won’t be at risk of being shut down for advertising their products in a certain way, or giving out a faulty order by mistake.
So, if crypto is so promising for cannabis companies, why isn’t it used by the majority of them? Well, a couple of key reasons: It’s still quite a confusing industry with a lack of regulation for the time-being, and so many companies are waiting to see it out, in order to understand what the future holds for it and how this can impact their business. Some businesses just aren’t tech-savvy enough to understand how it works, and how it can benefit them. As both cannabis and crypto continue to grow in the next few years, we expect that they will be used together to benefit each industry separately and will be adopted by many cannabis brands in order to benefit both business and customer.