cannabis cryptocurrency

The Color of Money: Digital Currency for Cannabis

Goodbye to the days of armed guards and duffle bags full of cash?

In normal businesses, the role of a Chief Financial Officer is a fairly buttoned-up affair, involving balance sheets and bank statements. In the booming cannabis industry, however, the role takes on a more outlaw vibe—with piles of cash being transported under the watchful gaze of armed guards.

Although marijuana is available legally or medically in some 34 states, it remains illegal under federal law. And despite the booming trade, the financial services industry has not caught up. No major US banks will serve cannabis businesses or their retail clients, as federally regulated banks are banned from doing business with what the government regards as criminal enterprises. That also bars the industry from using credit cards, or receiving loans—because if the government seized the company’s assets, the bank who have no way to collect.

Naturally, this state of affairs has caused untold headaches for the marijuana industry on the whole. From paying bills and employees in cash, to being charged higher interest rates and denied crop insurance—it’s harder to do business efficiently. One CFO cited being rejected by payroll companies, human-resource software firms and insurance brokers.

A Digital Payment Experiment

Arizona Attorney General Mark Brnovich last week signed off on a trial program that allows digital payments to medical marijuana dispensaries, a potential game changer for the state’s medical marijuana businesses.

Customers would still be expected to pay cash, but dispensaries that joined the service—called Alta—would have their cash collected by an armored car service. In exchange, they would be credited with Alta tokens, at a 1:1 exchange rate. Unlike other volatile cryptocurrencies—like Bitcoin—the Alta tokens have a fixed value.

Alta is an Arizona-based startup that calls itself a “digital payment club.” Its recent recognition by the state makes it more likely that the Department of Revenue might join the system—helping medical marijuana companies avoid walking up to pay tax bills with piles of cash.

“They can pay whoever they’re paying cash now on our system, whether taxes, utilities, payroll or other dispensaries.” Sarah Wessel, the company’s founder explained.

Then, those who are paid in tokens can cash them in online for dollars credited to their account.

The new trial program has some built-in benefits for cannabis businesses, like limiting the potential for cash skimming at different points in their operation, and lowering their risk for becoming targets of outright robbery. Proponents of the system argue that the small fee for the service is offset by lessening the risks involved in operating an all-cash business. Although Wessel declined to state the exact fees involved, in an interview with, she figured that generally, the transaction might take about a third of the 3 percent fee that a credit card company charges.

The state sanctioning of Alta also offers businesses using the system some protections—the state can oversee Alta’s books, for example, to ensure they are operating in the black. The company will also be subject to the Consumer Fraud Act, giving the Attorney General’s Office powers to protect people from financial crimes.

What’s more, Congress is still mulling over a bill that would prevent federal banking regulators from penalizing banks for working with cannabis companies that are operating legally in the state they are based in.

These changes indicate that society at large is catching on to the idea that the marijuana industry is here to stay, and that they can catch up or miss out.

Stay tuned for more as it happens!