The cannabis market in the United States and Canada continues to grow at a rapid pace. Companies must develop new business models and find their niches, not only to stay alive, but to stay attractive for investors.
One example of such company is GreenStar Biosciences Corp. (CSE: GSTR)whose management team has extensive experience in the Canadian cannabis market. They use their expertise to select the most promising competitors on the U.S. marijuana market and help them on the path to success. They can already see the results of this strategy. GreenStar’s partner tenant company Cowlitz, that produces and distributes high quality cannabis at affordable prices, regularly records a revenue of $4 million on quarter basis. At the end of last year, Cowlitz achieved $14.6 million in revenue after just five years since opening.
Another company that utilizes innovative solutions is Ohana Cannabis Co. A couple of weeks ago, Ben Bartlett became the first member of Berkeley City Council in California to use crypto-currency to buy cannabis. This transaction took place at Ohana Cannabis Co. in a matter of seconds via the Cred crypto-platform at an event organized by the Blockchain Advocacy Coalition. Ohana Cannabis Co. accepted Bitcoin Cash using Cred’s LBA token.
Even innovative companies can face big problems. Transactions and investment pose a particular problem for many U.S. based cannabis companies as a large number of banks refuse to offer them services.
The cannabis industry faces many obstacles to its development
In the United States, the situation is quite complicated from a legal point of view. On the federal level, the use of cannabis is illegal. However, it is allowed in some states for medical use and in others for recreational use. To make matters more confusing, the legalization of cannabis is constantly in flux.
While cannabis is a promising market, the growth of this industry is hampered by the inability of players to work with traditional banks. As the regulatory framework changes from state to state and the country’s federal position remains anti-cannabis, it is risky for banks to do business with companies in this sector.
The cannabis market is therefore mainly based on cash, which obviously leads to many problems. First, handling so much cash makes cannabis companies a tempting target for criminals. Secondly, it is more difficult to prepare accurate financial and accounting statements, which leads to tax problems. Finally, these accounting, tax and legal obstacles prevent significant long-term investments.
Crypto-currencies could be the solution
Another emerging market, Crypto-currencies, could become the solution to the banking problems of companies operating in the marijuana industry. Cryptocurrencies offer financial services to individuals and legal entities that cannot access traditional banking services, as well as providing a traceable, secure payment method.
More traditional cryptocurrencies such as Bitcoin, or Ethereum, in themselves offer another avenue to store and protect cash, but there are still significant legal, technological, and practical loopholes to utilizing such solutions, not least the instability that plagues the crypto sector.
More specialized solutions may be called for. For example CLIC technology acts as a payment processor that would make it possible for cannabis companies to process payments without being forced to rely upon cash.
Of course cryptocurrency comes with its own problems. It is still treated as a commodity under US tax law and market instability continues to plague the sector. In truth, the only solution for the sector is federal legislation that legalizes marijuana and removes any concerns surrounding the future of the sector. This would allow banks, and other financial institutes, to finally offer full services to one of America’s fastest growing industries.