While recreational Cannabis in California was legalized last year, it is currently still a classified as a Schedule 1 drug by the Federal Government. This makes federally regulated banking transactions illegal and represents a potential public safety issue. SF Assemblymember Phil Ting is hoping to address these conflicts by authoring a bill to allow Cannabis Businesses to utilize the emerging Cryptocurrency technology for payments.
The $1 billion growing industry is run almost entirely on cash and businesses often have to hire armored trucks to deliver the frequent hundreds of thousands of dollars in tax payments to state and local governments.
“It’s very risky for cannabis businesses to transport large amounts of cash in order to pay their tax bills. Too many things can go wrong. Cryptocurrency offers a solution that’s safer and cheaper for the industry,” said Assemblymember Ting, author of AB 953. “Lowering the cost to pay taxes will also help combat black market activity and encourage more businesses to get licensed.”
The City of Emeryville thinks it’s in the position to capture a significant share of the expected tax windfall of this emerging industry and representatives were on hand to express support fo the bill.
“Having to accept millions of dollars of cash for tax payments is a security concern and a significant cost for cities in California. AB 953 offers an innovative solution that cities have been waiting for,” said Ally Medina, Mayor of Emeryville for 2019. Medina is the Executive Director for Blockchain Advocacy Coalition which advocates for the advancement of regulations that utilize blockchain technology.
Medina was flanked by East Bay Therapeutics Founder Nasser Azimi who we recently profiled. East Bay Therapeutics opened Emeryville’s first recreational dispensary last summer.
Azimi provided his clear support for the bill. “The industry is in a high risk [position] because of this banking issue and I’m very pleased to see [Assemblymember Ting] take the lead on this. Cryptocurrency has evolved significantly and stablecoin has all the checks and balances to be an effective currency for our industry.”
AB 953 also addresses volatility concerns by using stable coins — virtual currencies collateralized by assets, such as the US Dollar. These currencies are pegged 1:1 to the US Dollar and will give both businesses and government agencies needed certainty to collect the exact amount of tax due. Sean Kali-Rae, President of the Silicon Valley Cannabis Association notes virtual currency provides a viable technological solution to eliminating cash and the associated risks from the industry.
There is growing excitement surrounding this pioneering way to solve tax payment and money transfer issues. “As the issuer of virtual currency that is backed 1:1 with the US Dollar, we see tax remittances from cash intensive businesses as a significant pain point we can help solve for the state of California” said Dan Schatt, Board Member of the Blockchain Advocacy Group and CEO of the Universal Protocol Alliance.
If adopted, California would be the second state to accept virtual currency for tax payments after Ohio began accepting business tax payments via virtual currency last November.