Wholesale cannabis companies are looking to crypto to solve some of the headaches of doing business in an industry where quality matters and trust is a must.
The red tape cannabis companies have to deal with makes it increasingly difficult to do business in general, but more specifically relating to moving money, or receiving financing, it is hard for them to find banks to work with due to the perceived regulatory risk. Although the legal sale of marijuana is permitted in more than 20 states in the US, weed is still illegal federally.
The technology blockchain brings can help solve problems in this billion-dollar industry. These include cross-border payments and banking restrictions, but crypto is not just about exchanging currency. People want to know where their product is coming from and need to be able to trust its quality.
The Benefits of Seed-To-Sale Tracking via Blockchain
Like a farm-to-fork-style business model for the food industry, corporate cannabis is adopting a seed-to-sale model of its own, with the help of blockchain. One of the main advantages of blockchain is that it allows secure record-keeping without the need of a trusted third party.
But if you think US regulator the SEC (Securities and Exchange Commission) is hard on crypto innovation, in particular when it comes to newer cryptocurrencies, there are even harsher levels of legislation for those dealing in cannabis.
Los Angeles-based pot startup Paragon launched its own blockchain-based cryptocurrency, Paragon Coin (PRG), and a marijuana-friendly workplace in Hollywood called ParagonSpace. Paragon was audited by the SEC and ordered to pay a US$250,000 fine after being accused of trading its PRG token as an unregistered security. Paragon denies PRG was a security and chose to pay the fine without admitting or denying the SEC’s findings.
The company maintains that it uses blockchain to ensure a secure system for monitoring the growth and shipping of cannabis, referred to in the industry as seed-to-sale tracking. Developing such a system as an industry standard is the goal of many blockchain cannabis companies.
Cannabis-specific cryptocurrency DopeCoin’s rebranded DigiGreen aims to serve up real-world solutions to selling weed, providing a payment gateway to a range of other blacklisted industries.
Cannabis Industry Needs to Cut Out the Middleman
The daily interactions involved in a cannabis company’s business could be much more efficiently handled by adopting a new system using crypto and cutting out the middleman. US software company Red Hat Inc’s Gordon Haff says these systems are ready to be implemented today. The delay, he says, is “getting everybody in the ecosystem to agree to use a common platform”.
The cannabis industry is still fighting discrimination and is waiting for governments to grant it equal rights to operate as any other legitimate business can. And crypto is still waiting for fear, uncertainty and doubt to dissipate for it to become more widely understood and accepted as the invaluable tool it is.
From a weed store point of view, to accept payment in crypto, it is presently too complicated both for staff and customers. Crypto is not yet widely adopted enough for it to be helpful for in-store purchases.
The world is not ready to pay in digital currency on a mass scale. The technology is too new and does not provide the average consumer with enough benefits to want to use a digital currency over traditional cash or credit card.
Adam Howell, DopeCoin founder
Blockchain technology offers efficient and sophisticated record-keeping processes for cannabis businesses transacting with each other within their industry (or for any business in any industry, for that matter).
Cannabis and Crypto Have Much in Common
Cannabis and crypto are kindred spirits. It has taken decades for the health benefits of medical marijuana to be recognised and for the industry to become legally corporatised.
As both sectors continue to grow, they face legislative hurdles. Banks are going to have to become more open to doing business with corporate cannabis and crypto or they will fail to profit from two of the world’s most rapidly expanding industries.
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