The legal industry of cannabis and the cryptocurrency industry seem to have a budding relationship if you excuse the pun.
The two share many common points. Both operate in legally gray areas, particularly in the United States. They face many of the same challenges from a financial, political and regulatory perspective. One could even say that their user bases overlap, since both legal cannabis and cryptocurrency are more popular with younger demographic data.
Their shared traits aside, cannabis and cryptocurrency have complementary business models that are likely to strengthen each other while adoption – in both – becomes more widespread. Some companies on both sides of the corridor are already taking advantage of this natural synergy. We will present a brief overview of the different commercial landscapes of cannabis and crypts and we will point out the important intersections that are developing between the two.
The challenges facing the adoption of cryptocurrency are all too familiar. Despite operating in the public sphere for much of a decade, cryptocurrencies are still seen as a marginal financial tool by mainstream media, public and financial institutions. Part of this is practical. The cryptocurrencies are relatively new when viewed from the millennia of the currency, and do not yet enjoy daily use anywhere outside some technological enclaves in Malta, Puerto Rico and some large cities in the United States and Asia. They are, in a word, unfamiliar.
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Few governmental government agencies know exactly how to deal with them, and even fewer companies trust them as a store of value. This is partly due to their current volatility and partly due to their low rate of adoption. It ends up being a bit of a vicious circle. It is difficult to convince merchants to accept cryptography because few individuals or financial institutions are willing to manage them. As a result, fewer traders are willing to accept them and the problem continues.
Then there are some very real legal problems. It is not entirely clear whether some, all or no cryptocurrency qualify as titles. They are not traditional currencies, as such, and therefore are not treated or taxed in the same way. And they possess a technological component that distinguishes them. They are archived and exchanged on blockchain, which offer fast, distributed and transparent transaction chains. These advantages are a bit of a double-edged sword when it comes to regulation, however, because blockchains can transcend financial institutions, businesses and even national borders.
The obstruction of cannabis
Suppose, for the moment, to talk about portions of the world where cannabis is completely legal. This allows us to do without, use another word game, with all the areas where cannabis has an unofficial status: non-application areas, decriminalized areas and so on. So, we're really talking about states, in particular, where marijuana dispensaries are all on board, legal and recognized by the US government.
Even with all official support, cannabis dispensaries and farms face significant challenges. Few banks want to offer loans or credit to a marijuana-based business due to market news and legal issues that arise when state rights come into play. Marijuana is still not legal at the federal level, and since banks are legally required to be federally insured, it is not entirely clear whether they can play on a field of equality in the marijuana industry.
This is important. It means that the billion dollar legal marijuana industry (and marijuana is legal in two thirds of the United States) must operate only on a monetary basis, just like its black market cousin. This puts him in the same boat "without crowds" of much of the third world.
It is this "bust-free" situation that really creates the potential for crypto and cannabis to come together. The cryptocurrencies have shown, through their blockchain technology, that they present a viable alternative for people who do not want or are unable to protect traditional bank accounts. As originally stated by Bitcoin's creator Satoshi Nakamoto in his famous white paper, cryptocurrencies contain all the trust and information needed to completely bypass third-party intermediaries, such as banks, within their blockchains. The value can be stored in a distributed and open way through the blockchain and can be transferred without the involvement of a financial or government entity.
It has already been done before, although the comparison is likely to increase eyebrows. The first diffuse adoption case for Bitcoin was actually the black market of the Silk Road, where drugs, guns and other unpleasant objects could be bought anonymously and in a way (at the time) not traceable with Bitcoin.
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This association between cryptocurrencies and drugs may seem uncomfortable, at the beginning, but both lend each other a long-term respectability aura. Marijuana can be prescribed at the federal level, but it is legal at the state level. Cryptocurrencies could get sideways glances from US tax and regulatory officials, but there is nothing inherently illegal in owning or using a Bitcoin.
Blockchain technology and cannabis seem to go hand in hand in this regard. The cannabis operators can count on a blockchain tailored for their use both as a deposit of value and as a means of transaction safer and easier to manage than cash. At the same time, the blockchain gets a group of adepts ready to be shown as a case of real-world testing. After all, if the blockchain works well for tracing and securely managing cannabis transactions, why should it not work as easily in car, flight or grocery transactions?
Both industries have a lot to prove, both to the public and to the legislators. The blockchain is practically designed for transparent and easily responsible transactions. This gives the cannabis operators some confidence from government regulators trying to ensure that the product is not transferred to markets that are still black and gives credibility to potential cryptocurrencies in terms of managing a large number of daily transactions.
There are several important projects currently being worked on to marry the crypto and cannabis industries. Most of them appeared during 2014. The five most important are PotCoin, CannabisCoin, DopeCoin, HempCoin and CannaCoin. As of May 2018, no one has yet obtained widespread adoption. At the moment, a new cannabis currency called VapeCoin is launched, which will be accepted in one of the largest cannabis and vape markets. However, they all share the same basic use case – giving marijuana growers, distributors and associated industries a common means of exchange and verifiable deposit value.
Significantly, everything except CannaCoin boasts a market capitalization in millions of US dollars. PotCoin, the oldest of the group, has a market capitalization of $ 31 million.
Grow up together
Both the crypt and the cannabis are brand new industries. The infrastructure for both is almost non-existent from every possible angle. In fact, neither enjoys legal status throughout the United States. Currently, cannabis is legal only by state, while the US Securities and Exchange Commission has a "hands-off" policy regarding the cryptocurrency trade.
The two are likely to grow together, so to speak. Their shared challenges create complementary growth opportunities, particularly in the legal and regulatory areas. Cryptocurrencies give transparency and responsibility to marijuana operators. The marijuana operators create a valid and stable customer base for cryptocurrencies, in addition to the capital injected. Both are ready for growth, as US demographics are increasingly in terms of regulation. Overall, cannabis and crypt present a unique vision of the future financial world.
This article originally appeared on the Green Market Report.