The patchwork of cannabis laws across different states and countries has created a grey area where Bitcoin can serve as a payment method for buying legal weed.
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It’s been a long time since a deluge of investors and speculators filled the crypto space with billions of dollars and washed away Bitcoin’s original reputation as something like a Silk Road’s in-house currency. Nevertheless, whatever made BTC a Darknet’s darling is still there: the anonymity of its users and the ability to make questionable purchases without leaving a paper trail.
So, it’s a small wonder that businesses working in a legal grey area try to give their customers peace of mind by accepting Bitcoin alongside bank transfers, cash-on-delivery, as well as credit and debit cards.
The so-called seed shops, to name just one example, sell cannabis seeds as souvenirs and thus protect both themselves and their customers from liability. However, they respect the wish of some of their buyers to keep a low profile and gladly take Bitcoin as payment.
Of course, the cryptocurrency revolution couldn’t but affect the burgeoning legal marijuana industry. Since California was the first to legalize the medical use of the substance in 1996, more and more US states and other countries have repealed the decades-long prohibition.
Currently, medical marijuana is legal in 37 states and Washington D.C., as well as in 30 countries. Another 18 states plus D.C. allow the recreational use of cannabis. Weed is also fully legal in Uruguay and Canada, and Germany is thinking about joining their ranks soon.
So, the legal marijuana business is growing, and BTC seems like a perfect fit for an industry that has yet to overcome its growing pains. In the United States, for example, the continued federal prohibition of marijuana makes it close to impossible to process payments of businesses legal under state laws through banks and other financial institutions. This makes dispensaries and even growing facilities a strictly cash-only business. The result? Cryptocurrencies to the rescue.
Last July, RocketFuel (OTC: RKFL) announced its decision to work with licensed cannabis dispensaries. RocketFuel is a global company providing one-click online payment with Bitcoin and other cryptocurrencies. Marijuana businesses can also bill their customers directly, without intermediaries, and many do so.
However, using crypto doesn’t solve all the issues and is a poor substitute for regular banking. It’s true that it decreases many risks of dealing with cash, such as robbery and theft. It’s also true that a few financial institutions that risk working with cannabis retailers charge exorbitant prices for their services, while Bitcoin transactions are very cheap by comparison.
But the drawbacks are many. Legal marijuana enterprises are heavily regulated and are obligated to keep track of every transaction. For crypto, it means having a record of the dollar value of every purchase made with BTC, and this must be the value at the exact time of transaction. This requires very labor-intensive accounting.
Another disadvantage of Bitcoin is wild fluctuations in its price, and this is one of the reasons established industries aren’t in a hurry to adopt cryptocurrencies. A sudden drop in price can not only decrease your margin but ruin your company’s finances.
Naturally, BTC isn’t the only cryptocurrency that can be potentially used for buying legal cannabis. There have been several attempts to develop industry-specific crypto assets. With telltale names like PotCoin, CannabisCoin, HempCoin, and even DopeCoin, they were supposed to create convenient and potentially global platforms to be used within the budding sector.
The first marijuana coins were introduced in 2014, not long after weed was legalized in Colorado and Oregon, but none of them has really taken off. They clearly remain underdogs of the crypto world in terms of the number of users, coins in circulation, and market cap.