Marijuana-related businesses face a funny problem: they make lots of money yet can’t securely put it in banks. The US banking system is nationally regulated and weed’s illegal under federal law, a Schedule I substance with no accepted medical use and a high potential for abuse, according to the Drug Enforcement Agency.
So cannabis-related deposits cannot be federally insured, and money is subject to seizure by the feds, making bankers and weed-related companies rightly dubious of doing business. Transactions are mostly in cash, which is stashed in pillowcases and floorboards. Now California is considering whether a state public bank could be a solution for a potentially very lucrative industry; marijuana is projected to bring the state over $6.5 billion in revenue by 2020.
State treasurer John Chiang on Aug. 10 met in Los Angeles with members of the Cannabis Banking Working Group he created in December 2016, after Californians voted to legalize recreational marijuana next year, to explore banking access for related businesses. In the state’s estimation, 70% of marijuana-related businesses don’t have bank accounts.
Chiang said a state bank would serve more than just marijuana businesses. Public banking is an increasingly popular idea since the Great Recession of 2008 among those dissatisfied by the private finance system in the US, he noted. A public institution would be beholden to state taxpayers and run by local treasury officials, able to issue low-interest loans for affordable housing or education, say.
The only public bank in the US now is the Bank of North Dakota, established in 1919 because farmers had difficulty getting loans through private banks under the federal system and the state’s main industry was agriculture. Deposits are insured by North Dakota, not the Federal Deposit Insurance Corporation, and not subject to federal regulations.
Others, like Colorado and Massachusetts, have mulled similar moves. . .