Cryptocurrency has been emerging as a potential answer to long-standing problems when it comes to banking and the cannabis industry. Conflicting state and federal laws have been causing issues in the cannabis industry for decades. The clashes between these laws create a lot of obstacles when securing cash and paying bills. One solution that’s currently being experimented with is cryptocurrency.
The Cannabis Industry Needs New Options
Cannabis is still classified as a Schedule I controlled substance on a federal level. As stupid as this may seem to anyone with even the smallest analytical mind, this means that banking institutions cannot insure, and will not accept funds from the cannabis industry. Meanwhile, cannabis sales in the US likely exceeded $20 billion in 2020. Nevada’s cannabis dispensaries reporting roughly $600 million of those sales.
Pretty crazy to consider that this huge multibillion-dollar industry is being forced to operate outside of insured banking systems. As the number of states legalizing recreational cannabis continues to grow, so do the problems associated with this legal discrepancy. This has left the Nevada cannabis industry on its own to seek out financial solutions. And with draconian federal laws and regulations getting in the way of logic and reason, this is where cryptocurrency comes in.
Cryptocurrency and Blockchain Technology
There are several cannabis-specific tokens that offer cannabis-related businesses such as dispensaries, cultivators, and their consumers with alternatives to cash transactions. In January 2018, Multichain Ventures Inc, a blockchain cryptocurrency company, announced that it would be contracting with the state of Nevada in order to fulfill the requirements of Assembly Bill 466. This bill requires that the State Treasurer create a pilot program establishing a closed-loop payment processing system to safely and efficiently facilitate financial transactions for cannabis companies. The aim is to provide secure and convenient methods to be able to pay state and local taxes.
Cannabis is no stranger to blockchain technology. Blockchain is a breakthrough technology that’s only recently been made possible through decades of innovations in mathematics and computer science. A cryptocurrency blockchain is similar to a bank’s balance sheet or ledger. Each currency has its own blockchain, which is an ongoing record of every transaction that’s ever been made.
However, blockchains differ from bank ledgers in that they are distributed across participants of the currency’s entire network. Firms across the world have been testing and deploying blockchain-based cannabis trackers that allow users to trace the supply chain from seed to store.
Nevada Cannabis Banking With Cryptocurrency?
The software produced by Multichain Ventures for digital currency processing eases the adoption of cryptocurrency by merchants in both point-of-sale and eCommerce. Their Merchant Gateway software has an array of features to meet merchant needs. This includes checkouts with real-time price conversion oracles. It also includes inventory management, stable asset trade processing to avoid volatility, employee sales tracking, and integration with popular eCommerce platforms. Multichain Ventures produces Cubed as their general merchant processing technology. Meanwhile, its Tokes Platform exists to serve the legal cannabis industry specifically.
The Tokes Platform includes point of sale processing software, eCommerce storefronts, mobile applications, and supply chain visibility tools. In order to address the cash-only problems facing the cannabis industry, this suite of software was created to provide tokenized transactions between consumers and businesses. However, that’s not all. It also offers the potential for business-to-business, and tax transactions with the state.
Additionally, Tokes also provides supply chain visibility on blockchain. And that’s a big deal for complying with Nevada state regulations. It can be integrated with seed-to-sale software, ensuring accuracy and data availability for regulators and stakeholders. The Tokes software products encompass a full loop from consumer acquisition of tokens via on-site kiosks, to merchant processing at the point of sale, to supporting business-to-business transactions.
Tokes Platform Could Prove Invaluable for the Cannabis Industry
Until cannabis businesses are allowed to participate in conventional banking, the cash-only ecosystem comes with an added liability of potential loss and increased difficulty with accounting in a compliance heavy market. This adds layers of complexity to reporting revenue and tax remittances. The Tokes Merchant Gateway software provides a point of sale application that allows cannabis businesses to accept tokenized asset “TKS” as well as other cryptocurrencies instead of cash payments.
Furthermore, customers can be onboarded to this process by using in-store kiosks to load their digital wallets prior to visiting a merchant. The Gateway point of sale software offers product management, employee sales tracking, exportable sales history, and integrates with state auditing systems like Metrc.
The Tokes Platform for digital currency processing eases merchant adoption of a technology that still mystifies much of the general public, making it more accessible to novice users while offering them many benefits. It offers users self-custody of digital currencies. This means that the user alone has possession of their digital money. The advantages include having access to your digital funds at any time or day instead of relying on a financial intermediary or working around banking holidays.
Another advantage of self-custody is that it protects against asset seizure or the freezing of assets, things that can occur in conventional banking. This was very common back in the day when California had legalized recreational cannabis. They suffered from product and monetary seizures by armed thugs who refused to acknowledge states’ rights. Luckily, this is less common now that cannabis legalization is much less taboo than in previous years. However, at any point, the Federal government could, in theory, come to do the same to any company operating legally under Nevada law.
Public Adoption of Cryptocurrency
While the adoption of cryptocurrency is rapidly growing, many users still struggle with understanding this new technology. And for good reason. Cryptocurrency and decentralized finance are extremely confusing subjects. This is because many people are not well-versed in either coding or traditional finance. That’s a big hurdle that needs to be overcome.
One of the primary goals of the Tokes Platform is to provide clean, user-friendly technology with entry points that reduce friction for the new user. Tokes is being developed with the intention of onboarding the average user with no confusion or headache.
Current features of the Tokes POS include digital currency payment checkout that can be completed via a QR scan of the mobile wallet. It also includes price conversion from US dollars to the equivalent value in chosen cryptocurrency. This allows for the acceptance of multiple digital currencies including Tokes, Bitcoin, Litecoin, Waves, and more.
Industry Adoption of Cryptocurrency
The POS offers many advantages for the merchant as well. Its features include product and inventory management fulfilled via integration with Pimcore, an open-source data tool. It allows merchants to easily add product ID numbers, as well as categories and prices. It has applications to track sales performance and the ability to display queried sales analytics.
For example, it allows the merchant to enter search queries to find the top-selling products, the highest-grossing salesperson, month-over-month sales, etc. It also offers both accounting and reporting services that are in exportable formats for accounting software. Tablets, desktops, and mobile devices will be able to support the Tokes software.
In order to further ease the consumer experience of working with cryptocurrency and to encourage its adoption and use for point of sale, Tokes Platform has strategically partnered with Vault Logic for the deployment of their multi-crypto Smart ATMs. They are designed to be used in brick-and-mortar businesses such as Nevada cannabis dispensaries. These Smart ATMs provide cash in the same way that you would expect from a traditional ATM cash withdrawal in addition to offering options for buying and selling cryptocurrency.
Solving the Cash-Only Problem
Multichain Ventures‘ solution to the cash-only problems facing the legal cannabis industry is to tokenize dollars one-to-one upon deposit in a federal bank. These dollar-backed tokens can flow within the system’s ecosystem.
In addition to being able to purchase tokens, users can cash out their tokens for fiat. Fiat money is defined as inconvertible paper money made legal tender by a government decree, for example, the US dollar. The term “Fiat to crypto” means buying cryptocurrency with fiat money, so in this case, the user can convert their cash to tokens, and back again.
This addresses a concern that is often brought up in arguments by those that oppose cryptocurrency as a solution to the problems in cannabis banking. That closed-loop systems park money in a financial cul-de-sac, only allowing transfers between participants. Because users can cash out their tokens for fiat, as well as purchase tokens from fiat, this pitfall is avoided. And much like using a credit card, digital payments are safer. No cash to lose or have stolen. As long as you don’t lose your crypto wallet pin, your funds are super safe.
Why Consider Using Crypto?
So why would a legal cannabis-based business choose cryptocurrency over cash and debit sales? To start with, the storage and transportation of cash is a huge security risk for cannabis establishments. The knowledge that these businesses have large quantities of cash on hand has made them targets for theft and violence. Law enforcement officers in Northern Nevada testified about an incident in which a car rammed itself into a cannabis dispensary in an attempt to steal cash or cannabis.
Lobbyists for the City of Reno report that Reno adds extra security for its quarterly cannabis tax payout days. The Department of Taxation reports that they now handle five times the amount of cash that they used to, increasing the demand for armored truck services. Cash has low traceability, which makes it easy to skirt taxation as well.
By contrast, cryptocurrencies are stored securely via complex cryptographic functions on a digital “wallet”. Additionally, cryptocurrency is incredibly secure and nearly impossible to break into. For most cryptocurrencies, decentralization is the key here. And while this is not the case for Tokes, it’s still a fundamental reason why blockchain is a solid choice. The user is still encouraged to follow common sense security practices. Using strong passwords, keeping their wallet offline when not sending transactions, and avoiding malware are all smart choices.
The Benefits of Using Cryptocurrency
A particularly beneficial feature of cryptocurrency is that it has the option of a multi-signature wallet. This requires more than one party to sign off on any individual transaction. This is perfect for businesses with multiple owners who want to prevent any individual partner from absconding with funds since they cannot be moved without all parties signing off. Another huge advantage to cryptocurrencies is that they are not susceptible to asset seizure the way traditional bank accounts are, as no centralized service holds the assets.
On the legislative and tax front, blockchain and cryptocurrency provide significantly more transparency than cash transactions. Every transaction can be reviewed and audited by anyone because they are recorded on a public ledger. This is a result of the fact that wallet addresses are not directly associated with any one individual or business. However, they are visible to anyone who wishes to see or verify anything. In the future Multichain Ventures foresees an environment in which each legal cannabis business can register their wallet address, allowing all transactions that flow through their account to be directly reported to the appropriate agencies. Instantaneously. With little to no effort. Talk about a game-changer!
Previous Tries to Bring Crypto and Cannabis Together
Beyond the pilot program that is being built in the state of Nevada, there are other blockchain cryptocurrencies centered on legal cannabis-based businesses as well. And there have been for quite some time. They are considered volatile investments, as is the case with many cryptocurrencies. One such project is Potcoin.
PotCoin launched in 2014. It is one of the first cryptocurrencies created for the cannabis industry. It reports having more than 408,000 network participants, and more than 224 million coins in circulation as of 2018. In fact, I’ve been following Potcoin since 2017. However, after a poor choice to create a relationship with Dennis Rodman as their spokesman, the project suffered badly. Furthermore, with the crash of 2018 affecting every cryptocurrency on the market, the project fell into obscurity.
CannabisCoin launched few months after PotCoin, as a peer-to-peer cryptocurrency. It has experienced many dips in value over the years, but in 2018 reported 77 million coins in circulation. Hempcoin is another cannabis-specific crypto project. HempCoin was designed specifically to be used by cannabis farmers and was one of the first 30 coins created in 2014. As of 2018, it had 253 million coins in circulation. But TKS is different.
Tokes Platform offers significantly more versatility for use throughout the entire cannabis industry. For example, they have a suite of software built out that doesn’t just include a coin. They’re ready to tackle a variety of issues with a variety of digital solutions. And while Nevada is their first target market, they plan to go national. Then, maybe global as well.
This Could Be a Real Game Changer
If successful, Nevada will be the first state to apply closed-loop technology to legal cannabis markets. Similar proposals for states such as Ohio and Colorado were not successful. Some experts are skeptical about whether or not cryptocurrency will be able to address the heart of the problems facing this industry. It should be noted, however, that no state money went into funding the Nevada pilot program. Instead, the contract with Multichain Ventures is an opportunity to have their project blessed by the state. And the same goes for the other of the two companies given the go-ahead. It’s up to them to prove their software’s worth. Should they be able to accomplish this goal, the Nevada cannabis industry could change forever.
“Most business operators take traditional banking for granted,” says Brave New Coin founder and CEO Fran Stranjnar in an interview with Protos, “but the cannabis industry is cut off from most financial services in the US. Operators have had to be particularly innovative when it comes to managing their cash.”
The Tokes Platform has the potential to bring increased security, organization, and transparency to transactions in the legal cannabis industry. Furthermore, the attention to detail and user-friendly interface will make it an easy technology to adopt, even for customers who are completely unfamiliar with cryptocurrency. Clearly, there is a lot of reason to be optimistic that cryptocurrency could solve the longstanding banking problems that have plagued the legal cannabis industry.
About OMG THC
We’re homegrown in Las Vegas, Nevada. We embrace niches others in the Cannabis market ignore or reject. Vegan? Diabetic? Gourmet cook? Old-school hash connoisseur? Looking for a specific ratio of CBD and THC in your products? You got it!
Additionally, we care about quality and the effects our products have on people’s lives & health. OMG THC use only CO2 and ethanol extraction methods. We NEVER use butane or other petrochemicals to extract our oils. We want our products to be easy on the body and safe for our team to make.
Our products are simple and they are great. From the cannabis oils, we use to the packaging and the varieties of our products. Finally, and best of all, our edibles are damn delicious! In other words, if we wouldn’t want to eat them, we aren’t going to sell them to anyone else. We NEVER cut our concentrates with anything – period! EVER! We use top-of-the-line C-Cell hardware – always. We ensure quality and purity.
For Adult Use Only
For adults 21 and over. Keep our products out of reach of children and pets. Be smart. Be Vigilant. Finally, enjoy our products responsibly and keep everyone safe.
As always, feel free to Contact OMG THC with any questions or comments you might have. We’re here for you and we’re responsive to your needs. If you’d like to locate OMG THC products, check out our dispensaries list. You can also find out more about OMG THC on Leafly.