The cannabis industry has been booming for some time now, but the market has also been deeply affected in the U.S. by the federal regulations which do not allow for cannabis companies to have access to basic financial services. This could however, all be changing in the near future as senators and politicians alike are vying for banks to work with companies in the cannabis space.
Earlier in the month, the New York Department of Financial Services issues a statement that encouraged state-charters banks and credit unions to begin working with companies that are involved in the cannabis market. The report states that there are many issues that currently reside within the cannabis industry due to the fact that the companies do not have access to the basic financial services necessary to run a business. The memo states that “Forcing medical marijuana and industrial hemp businesses to operate solely with cash creates a public safety issue, as cash intensive businesses and their suppliers, employees and customers become targets for criminals.”
The federal laws surrounding cannabis currently list it as a Schedule I narcotic. This means that it has a high potential for abuse as well as a low amount of promise as a medicinal substance. Although both of these claims have been refuted many times by scientific journals and medical studies, the government has yet to change the situation. This has made it so that companies cannot use banks due to the fact that they are federally insured and funded. This also has meant that companies in the industry are unable to take any form of payment except cash. Because the industry now is based off of cash payments, many businesses have in turn been robbed and have had a generally difficult time running a business. Everything from paying employees to bills becomes extremely difficult, thus the need for reform. The report continues to state that “Large amounts of cash distributed outside the regulated banking system is unacceptable and creates risks to the companies and their employees and business partners … New York must act.”
This is one of the first times that a state has reached out to banks to give a push toward moving into the cannabis industry. The issue of banking has been one of the reasons that the cannabis industry has had a difficult time growing in the past few years. James Thurston, a spokesman for the Ohio Bankers League stated that “we do have many banks that have an interest in banking these businesses. But as long as there remains this conflict with federal policy, they remain very reticent to go near marijuana businesses because there is just too much risk and work.” The real truth is that banks should be able to get involved in what has very quickly become a multi-billion dollar industry. According to the same report “Under the new guidance, New York says its Department of Financial Services will not sanction any state-chartered bank or credit union that offers services to a New York-based medical cannabis firm, as long as that institution is compliant with: The guidance provided by the 2013 Department of Justice memo from then-Deputy Attorney General James Cole, The 2014 Financial Crimes Enforcement Network (FinCEN) guidance, New York laws and regulations.”
As long as the industry is able to be compliant with these regulations, banking should be able to occur much easier than before. The hopes are high that this will be the first of many issuances allowing banks to begin working with companies in the cannabis industry.