Cannabis, Meet Crypto

The U.S. cannabis industry, projected to be worth some $40 billion by 2030, faces legal and regulatory challenges including lack of access to traditional banking and supply chain transparency. Can crypto help?

The utility of blockchain technology to address data mutability, trust, authenticity, and traceability of assets could be the ideal solution for these challenges that the cannabis industry faces.

Under U.S. federal law, marijuana is still a Schedule 1 controlled substance, creating both financial and operational hurdles for state law-abiding operators in the expanding cannabis landscape.

Federal Reserve-backed traditional banks continue to shut their doors to state-licensed cannabis companies, unwilling to touch funds that have passed through operations that are still technically illegal under federal law. Cannabis startups deal with higher risks associated with all-cash operations. Moreover, they don't have access to traditional bank loans to build their businesses. Smaller credit unions have emerged — followed by long waiting lists — but now that the SAFE Banking Act was removed from Congress' annual defense spending bill, any hopes of immediate progress on the national horizon have been dashed.

On the transparency front, legal cannabis consumers still don't know where the products are coming from, how they are produced and who is cultivating them.

Here are a few real use cases of leveraging blockchain and crypto for the cannabis industry, apart from marijuana-based cryptocurrencies that have existed since 2014, like PotCoin, CannabisCoin, DopeCoin, HempCoin and CannaCoin.

Global Cannabis Capital for Investment

Luxembourg-based company Global Cannabis Capital (GCC), which has operations in Latin America, is the first tokenized cannabis ecosystem issuing security tokens to raise investments.

Token offerings could broaden the funding sources available to the pot industry, which can't borrow money from banks due to the U.S. federal government's prohibition on marijuana. Funding so far has come chiefly from venture capital, wealthy individuals, and individual shareholders rather than institutional investors.

Last year, GCC's incubator unit, Cannabis Company Builder, raised $500,000 of seed capital from investors, including a pharmaceutical company and delivery app entrepreneur Ruben Sosenke.

CEND for Transparency

Another illustration is a Polygon blockchain company called Cannabis Without Borders (CEND) that is creating a transparent, end-to-end solution for buyers and sellers of both medical and adult-use cannabis. The crypto company currently works with 30+ countries across North America, Europe, Latin America and the Asia-Pacific region.

CEND sources, certify and securely delivers cannabis products to connect producers, manufacturers, and consumers across the legal global cannabis market. The service also facilitates in-country production and regulatory support and utilizes government and industry relationships, optimized systems, and custom blockchain technology.

"We wanted to create a streamlined way of moving cannabis product as a commodity as you see with every other commodity out there, where everyone knows exactly what's going on," CEND CEO Erik Holling told Cannabis Wealth.

Such blockchain services can be used to track and trace cannabis products across the products' entire lifecycle and will be able to detect fraudulent items. Additional data available to consumers could include what lighting has been used, how the plants are growing, the cleanliness of facilities, and more.

Talking about regulatory issues, Holling said, "Ultimately, transparency is what leads politicians to feel more secure about promoting the industry in their countries. It allows banks and insurance companies to feel more confident.”