Cryptocurrency has been taken as an elixir for solving the global cannabis industry problems related to banking and financial operations. Cannabis is legal in many countries mainly for medicinal and developmental uses. However, it is still illegal under federal regulations. Several cannabis enterprises have been shunned by credit card networks and federal banks that are coercing them to cache cash on site. However, this has made them vulnerable to brutal burglary, and payment of extra money to banks. In this article, we will look into the index of cannabis adoption in different countries and the number of users to understand its potential. We will also evaluate the potential of cryptocurrencies and NFTs to solve the problems of the marijuana industry.
Cryptocurrencies: Can it Help to Resolve the Issues in the Cannabis Industry?
The Global Cannabis Market: What You Need to Know?
Cannabis Users Statistics Around the World
Silk Road: The First to Use Bitcoin to Buy and Sell Marijuana
GCC Plans to Develop 100,000 Tokens
Crypto Cannabis Club: A NFT Community for Stoners
North America Dominating the Market Since 2020
Crypto & Cannabis: But, What About Tax?
The SAFE Banking Act
Blockchain to Help With Supply Chain Management
Cryptocurrencies have evolved over the years, and with the global adoption of the currency, the cannabis industry is considering it to be a natural solution to its banking problems. Cannabis enterprises can incorporate the technology and accept crypto payments instead of cash. This will help them to keep the cryptocurrencies in their crypto wallets rather than piling up the cash which has been an open invitation to robbers for years.
The problem lies in the very nature of cryptocurrencies, which is their “volatility”. The high transaction costs and the market volatility can become more of a poor choice for the cannabis businesses to take the trouble of setting up a crypto payment gateway and learning its functions. Other than these problems, it is also important to remain exempt from the regulations. A similar situation forced a global cryptocurrency company in 2018 to shut down a medical marijuana dispensary account based in Washington due to the restrictions imposed by federal laws.
Also Read: Worldwide Crypto Adoption Index 2022
The market size of the cannabis industry worldwide in 2020 was $20.47 billion. The industry is estimated to observe a rise in the market size from $29 billion to $35.4 billion in 2022. According to the market research experts of HashCash Consultants, the cannabis industry might grow at a CAGR of 11.2% between 2022 and 2027 and is assumed to reach $57 billion by 2027. The sudden growth is due to the growing demand of the market, especially post-pandemic. Cannabis is existing since ancient times, almost over a thousand years with its consumption based on acknowledgment and affirmed medicinal and healing advantages. C. Indica, Sativa, and ruderalis are the three main species of cannabis. With that, marijuana is legalized in several countries around the globe.
According to the UNODC, (United Nations Office on Drugs and Crime), Cannabis is the most widely trafficked, cultivated, and consumed drug around the globe. Weedmap’s survey, suggests that ever since the global covid 19 pandemic, 50% of cannabis users have increased their consumption rates. The weeds are no more confined to men. According to 2022 research conducted by Eaze, there has been a rise in new customers, with 52% of them being men, and 48% of them female. Although in many countries, marijuana is still illegal, the United States has made rapid progress and made recreational cannabis legal access to almost 44% of Americans. Research conducted by Gallup shows, that 19% of the population born before 1945, have tried marijuana, while 49% of GenX, 50% of Baby Boomers, and 51% of millennials inform that they have tried cannabis.
Amidst the legislation on cannabis, apart from the recreational use of the product, the cerebrovascular effects are unknown, especially in young adults. Here is a survey conducted on behavioral risk factors.
Marijuana is consumed by several age groups between 18 to 44. Here is the report of a survey conducted among different age groups to check its consumption rate.
The survey on marijuana consumption is divided into different categories. The users are segmented into the education sector as high school students, high school graduates, college students, and college graduates.
This segment consists of marijuana consumers depending on their income status, and the well-settled insured users.
Marijuana has side effects on the cerebrovascular front, which are yet to be known. Here is a survey conducted on a few health diseases mentioned below.
The crypto industry and the cannabis sector merged in the very first modern darkest network, known as Silk Route, founded by “Ross Ulbricht”, also known as “Dread Pirate Roberts”. In 2013, the FBI shut down the Silk Route that allowed users to buy and sell marijuana which was at the period illegal in several states. It has been decades since Silk Route was shut down, and ever since the cannabis industry along with web3 has made significant growth in normalizing the trend.
The Farm Bill of 2018 erased hemp from the marijuana category under the Controlled Substances Act, while many states legalized cannabis. $423 million in tax revenue was collected after selling marijuana in Colorado in 2021, while only $387 million was collected in 2020. Last month, Democratic Sens. Cory Brooker and Senate Majority Leader Chuck Schumer, and Ron Wyden of Oregon created the Cannabis Administration & Opportunity Act which would eliminate cannabis from the Cannabis Substances Act, eliminate any arrests, and convictions for nonviolent cannabis federal offenses and introduce a basic tax on the cannabis products.
Since cannabis is illegal in several countries, it is very difficult to raise investment and make it grow. However, a Luxembourg enterprise based in Latin America has found a noble solution to the problem.
According to Bloomberg, the GCC or Global Cannabis Capital is planning to raise more capital. The report also shared that the company is planning to sell tokens on the Ethereum blockchain that show its equity rather than the conventional IPO. While GCC originally planned for a reverse public offering in Canada that is marijuana friendly, the company ended up looking into options and is now aiming to offer 100,000 security tokens.
The process will occur in Luxembourg as the regulations are favorable toward cannabis and with the idea of protecting the products with blockchain technology. GCC is using a security token which means it is backed by the equity of the users. The token offering will help the enterprise to enlarge its sources of funding available for the pot industry that cannot lend money from banks as it is illegal at the federal level. Therefore, funding is mainly from venture capital and other sources like individual shareholders, and wealthy individuals.
“IPO process cannot be executed as it takes twelve to fourteen months to process. On the contrary, tokenization takes only three months to process”, says Andres Israel, the Chief Executive Officer at the company’s main office in Uruguay. To carry forward the plan, GCC plans to develop 100,000 tokens that resemble its capital stock. Cashless ATMs have been doing great for processing seven billion dollars in cannabis transactions.
On a night in Los Angeles, a group of strangers assembled at a colorful smoky venue. The majority of these people were meeting each other for the first time while some were old friends calling each other weird names. The gathering was to celebrate the launch of Crypto Cannabis Club’s metaverse dispensary. The CEO of Crypto Cannabis Club, Ryan Hunter says that “even during the crypto bear market, the club is unperturbed taking up NFTs”.
The club consists of six thousand members and each had to acquire a “toker” which s a bright-colored stone-looking character NFT that helps the users to take advantage of its benefits which include events. The basic price of a toker is around 0.15 ETH, which is around three hundred dollars. The cost of NFTs dipped last week with its lowest reaching around 0.1 ETH. However, it has bounced back up to 50% ever since.
The founders of the club, Jima and Kevin Fitzpatrick worked with the cannabis industry for a decade before entering the crypto space two years ago. The community quickly came together as the entire NFToker collection was sold out only within seven days of its launch with the lowest tokers selling at 0.8 ETH which is roughly two hundred to two hundred and fifty dollars. Hunter said that the “ten thousand NFTs of Crypto Cannabis Club are now owned by 4500 wallets”. Today, the group has twenty-three thousand subscribers and twenty-eight chapters around the world. Some of the high-profile members of the group are Tommy Chong, Cookies CEO Berner, Cheech Marin, and rappers Lil Baby, and Ja Rule.
The crypto cannabis club has been existing for a year yet the group has been conducting several activities. Within a year, the company has hosted five events and meetings that include business conventions such as Art Basel, a trip to Mexico with members, and MJBIZCON. The club is planning to host more events and is jointly working with several cannabis brands and make it available in several states. These groups will help the club to survive the crypto winter.
Hunter once developed a ten-acre cannabis farm and shared his vision to provide a community that can share both virtual and real-life experiences. The NFT social club has a virtual dispensary in Voxels Metaverse and has partnered with thirty cannabis accessories and product providers to prepare a utility program that offers discounts for the members of the Crypto Cannabis Club.
North America dominated the cannabis market in 2020 and was estimated at a value of $19.78 billion. The recreational legislation in the United States started in 2012 with Washington and Colorado becoming the first two states to make the recreational use of cannabis legal.
In 2019, 11 states and the Columbian district legalized cannabis for recreational purposes. In the United States, all the state medical hemp laws have considered it as a type of medicine for diseases like anorexia, chronic pain, arthritis, Alzheimer’s disease, post-traumatic stress disorder, epilepsy, and even cancer. By being the leader of the worldwide marijuana laws, Canada has been the frontrunner in the industry.
The second largest market that is responsible for the growth of the use of medicinal cannabis and under the legislation in Europe. In European countries, cannabis is used for medical treatments and is effective in trials, and is used to treat health conditions such as cancer, AIDS syndromes, ad appetite stimulus. Moreover, the products are rapidly increasing with the changes in government policies. In 2018, the government of Greece and the United Kingdom approved the use of medical marijuana.
The lack of bank access issue in the cannabis industry is real and well known. However, it is still not the worst problem for the industry. The professor of law at the University of California, Bob Solomon, and the co-chairman of UCI center, Irvine for the cannabis study shared with a worldwide research firm, that not banking, but the tax burden will be the main issue for the cannabis industry.
Since cannabis is federally illegal, the industry is subjected to Section 280E of tax policy. Therefore, the cannabis business needs to pay tax without deducing the basic expenses, which makes minimum profit margins. This means that the companies need to pay a 70% tax rate, while usually, the corporate business tax rate is only 20%.
The owner of Fortis Law Partners, based in Colorado shares that many people invest in cannabis thinking that they will earn money, however, they do not consider the taxes and the small profit margin which is why many fail to carry forward their business. These taxes are not limited to the businesses, but also affect the consumers including the local surcharges making it difficult for the legal dispensaries to stand out in the competition with the black market.
The SAFE Banking Act can resolve the basic problems of the cannabis industry by making banks help the industries that provide their banking services to legal businesses without the fear of committing federal crimes.
The bill has been prepared and shared several times through the bipartisan board and has passed, yet every time the bill was canceled in the Senate. Baskerville told a research firm that “the bill may not able to remove all the problems in the industry, yet it is the best chance to make a remarkable impact on the industry”.
While some cannabis businesses are paying around two thousand dollars a month just for the sake of having a bank account. While others are still figuring out a way to save themselves from paying high fees and taxes. Although the SAFE Banking act is not a solution for the cannabis industry, it is still a better approach than introducing cryptos and NFTs.
While cryptocurrency may not be the solution to all the problems related to the cannabis industry, the CEO and president of Safe Harbor Financial, Sundie Seefried is providing banking solutions to the cannabis industry since 2015 and processed around fourteen billion dollars.
Blockchain technology in the cannabis industry can revolutionize the way the industry works due to its power of traceability. At present, Safe Harbor relies on different sources to keep track of the cannabis products which is at high risk.
The city council member of Berkeley California, Ben Bartlett who is a crypto lawyer by profession shares her views that blockchain technology can help cannabis businesses with compliant supply chains by tracking ownership and providing provenance.
At first, the emerging cryptocurrency market, and the legalized marijuana business might seem unmatched. However, if you look closely, there is a harmonious environment between the two. It is not only because the cannabis companies which at the present struggle to access even basic financial services can greatly benefit from digital assets like Ethereum and bitcoin, but also because the implementation of blockchain technology can help to optimize the overall business with its transparency and traceability in areas where the mechanism is quite complex. The cannabis industry can be best adjusted with stablecoins. Since the industry already consists of market volatility, therefore, any additional risk may complicate the scenario. Although it is a mere suggestion, the choice of what’s better is still under development. While crypto can be a great idea to generate funds, its volatile nature may put the entire industry at risk.