“Coming to a Dispensary near You… Digital Currency for the Legal Marijuana Industry”
Marijuana is currently legal in some form among twenty-eight states within the United States, plus the territories of Guam, Puerto Rico, and the District of Columbia. Bringing the whopping grand total of 31 US territories that have approved medical and/or recreational marijuana programs. However, since marijuana is still federally illegal these business owners face many unique challenges.
Technically, under federal law cannabis is treated like every other controlled substance, such as cocaine and heroin.
As It Stands Here Are Some Federal Regulations:
Federal Register, released Dec. 14, 2016, contains 21 CFR Part 1308 that establishes a new drug code for “marihuana extract”.
AGENCY: Drug Enforcement Administration, Department of Justice.
ACTION: Final rule.
“As provided in 21 CFR 1308.03, each controlled substance or basic class thereof is assigned a four digit Administration Controlled Substance Code Number (‘‘Code number’’ or ‘‘drug code’’) that is used to track quantities of the controlled substance imported and exported to and from the United States.”
The Controlled Substances Act (CSA) (21 U.S.C. § 811) does not recognize the difference between the medical and recreational use of cannabis.
On August 29, 2013, the Department of Justice issued a guidance memo to prosecutors concerning marijuana enforcement under the Controlled Substance Act making it clear that prosecuting state, legal medical marijuana cases is not a priority.
What is PotCoin?
“PotCoin was the first cannabis related blockchain currency and intends to remain a leader in the space.”
Since PotCoin is a cryptocurrency powered by blockchain technology it is designed as a decentralized currency for the legal marijuana industry. PotCoins are their own blockchain and accompanying cryptocurrency (digital currency) where users can download their PotCoin-QT wallet app or a wallet who supports PotCoin.
A Few Benefits of Utilizing a Cryptocurrency, Such as Potcoin, Include:
- Anonymity, if chosen. Keep in mind that all PotCoin transactions are stored publicly and permanently on the blockchain, which means anyone can see the balance and transactions of any PotCoin address. This is true with any blockchain and cryptocurrency but there are many practices to follow, such as not using the same PotCoin address more than once.
- Low fees for both national and international payments
- Creates a global, decentralized marketplace
- PotCoins go directly as a digital payment from one party to another, no middleman, no bank, no physical cash.
- Currency is secured by the blockchain, cannot be seized, all transactions are permanent and verifiable.
- You can purchase anything, anywhere, as long as the platform, store or Marijuana supplier supports PotCoin, meaning they have a PotCoin wallet.
- If you receive payments with PotCoin, same as any cryptocurrency, there are many service providers who can convert them into your local currency or another currency of your choice.
“Merchants and users can use PotCoin to simplify payments, record business processes, and address security issues” -PotCoin
PotCoin Is Open Source in Active Development
PotCoin is among many cryptocurrencies exploring new payment methods and experimenting with new ideas, in fact, there are more than 710 cryptocurrencies today, all varying in maturity. Maturity depends on many factors including, but not limited to, adoption rate, usage, age or length of time active usage has occurred, consensus mechanism, so on.
In April 2016, PotCoin development team released this 4-20 Update outlining their objectives, goals, project mission, etc.
A few key highlights from this document include the following:
“In order to take advantage of new technologies and potential security advantages, PotCoin will explore the possibility of migrating to the bitcoin or potentially the ethereum blockchain.”
“We strongly believe that these next level blockchain platforms is precisely what is needed for the PotCoin community to grow. The Ethereum Virtual Machine allows for the creation of a Decentralized Autonomous Organization (DAO) which will allow for community voting, decentralized development, the creation and implementation of blockchain 2.0 technology and smart contracts.”
PotCoin is open source, meaning a dedicated community of individuals, which could include yourself, actively develop PotCoin. If you wish to take a look at what has been going on or you want to contribute you can check out their GitHub.
There is more than likely an active Slack channel that you could find and be invited to through some internet searching if you were truly interested in working on the PotCoin project or speaking with the active development contributors.
Here is the most recent PotCoin Developer Update February-March 2017.
Current Challenges Facing the Legal Marijuana Industry
The United States has a lengthy history with cannabis dating back to the 1600’s. The Virginia Assembly required every farmer in 1619 to grow hemp, as it was recognized and exchanged as legal tender across many states including Virginia, Pennsylvania, and Maryland. Shortly after, up until the 1900’s, marijuana was the main ingredient in medicinal products sold over the counter in pharmacies regularly. Many increased restrictions and labeling as a controlled substance or poison began in 1906 while prohibition began in the 1920’s. This prohibition has been upheld. The first US state to legalize medicinal cannabis was California in 1996 by popular vote, followed by several states including Hawaii in 2000. In 2012 Colorado and Washington simultaneously became the first states within the US to legalize recreational use of marijuana paving the way for marijuana reform! Today the ongoing conflict where 31 US states and territories have legalized cannabis against the federal government’s direction and federal regulation leads to many unique challenges.
Welcome to the Era of the Divided States of Cannabis
In reading this article or hearing the news, posts, vlogs or the variety of ways individuals address their stance on marijuana reform today you can see the legalization reform has been widely accepted. However contrary to popular belief this does not directly equate to anyone 21+ can walk into a marijuana retail shop and buy what they please and it also does not mean that there is a unified list of medicinal qualifications. These laws vary state by state and even county by county within those states. Having lived in Washington state, the first time I visited Colorado my expectation was to walk into a recreational marijuana store and buy the same products in the same fashion as at home in Washington. This is one of those experiences where you begin to realize how vastly different these laws can be, state by state, county by county and day by day! During the summer of 2016, my first visit to Colorado, the current Denver law regarding recreational marijuana was broken down where all adults over 21 are allowed to possess an ounce of marijuana — but retail marijuana shops couldn’t sell more than a quarter-ounce in one day to people without Colorado identification. Well, I had Washington identification and this was foreign because at home just before leaving if you were 21 or older, you can buy and possess one ounce at a time, whether or not you were a Washington resident!
Then during my return visit to Denver, Colorado, within the next 1-2 months out of state residents were able to buy the same amounts as in-state residents. This is because during May 2016 House Bill 16-126 was given approval by the state legislature allowing out of state residents the same purchasing power as in-state residents, which is four times the previous amount allotted to out-of-staters. Also at this time Senate Bill 40 passed changing the law to allow out of state residents to own marijuana businesses in Colorado, something that had previously been verboten. Changes such as these take place yearly and if you plan on visiting one of these states for some of the recreational activities it would be best to do your research on what is and isn’t allowed prior to going! Even though marijuana is recreationally legal in both places, some will say Washington is more conservative than Colorado, due to the lengthy process of Washington issuing licenses, the time it took for Washington stores to open and gain traction, advertising and public displays have strict regulations, and so on. Just remember it is a constantly evolving emerging industry!
Unique Challenges: Can I Use My Credit Card to Buy Weed?
Among varying governing laws, packing and labeling regulations, age restrictions, medicinal restrictions, and more there are also currency restrictions. From personal experience, I can attest to packaging, labeling, buying, selling, trading restrictions being overwhelming as they change consistently in order for recreational and medicinal shops to meet local and state legal requirements. It is in the best interest of retail recreational and medicinal shops to meet all state and local guidelines at all times to limit the friction since this is such a widely controversial subject, compounded by federal regulations deeming any and all of these activities illegal.
One major obstacle to overcome is currency exchange for goods and products. Personally, this may have never crossed your mind if never having visited these states or even if living in these states and just never decided to check out the local shops. Well, it turns out that since major credit card companies such as Visa, American Express, MasterCard, and so on, are partnered with federally regulated national banks you CANNOT use these to purchase marijuana or cannabis related items since this sale falls under the US Controlled Substances Act. That’s right, it is federally illegal to purchase cannabis meaning the only way you’re going to get your hands on the ganja is with cold hard cash. Granted just about every retail shop can point you in the direction of an ATM or have one on site but then you face paying any fees associated with taking out cash from your credit card or another bank’s ATM if you are ill prepared and didn’t realize this is a law.
Now keep in mind these businesses are required to solely operate in cash, it is more than just the sale of products handling cash. Payroll is cash, taxes are cash, this is a fully functional legal business operation required to pay taxes and abide by state and federal employment laws. Imagine running a business, booming business strictly in cash. This is exactly what is happening, right now. Cannabis businesses in some states pay sales taxes upwards of 25%, meaning when taxes are due, an employee or business owner is transporting all of that money in cash to state departments or dedicated establishments. Colorado Department of Revenue shows that with a $1 billion industry in 2015 marijuana sales raised $135 million in taxes and fees for the state. From January to October 2016, Colorado collected more than $150 million in taxes from legal marijuana sales.
Dea Raids Medical and Recreational Marijuana Businesses Across the Country
A quick internet search will explain just how prominent of an action taken by the DEA their marijuana-eradication program really is. The year 2016 encountered numerous raids nationwide in states where operations were legally growing, distributing and selling medicinal and recreational marijuana. Montana Buds, the state’s largest medicinal dispensary, was raided in 2016 by DEA, seizing property, arresting employees, interviewing neighbors, cutting down nearby cannabis plants, and closing down all Montana Buds locations statewide. San Diego, where $324,000 in cash and thousands of dollars worth of inventory was seized on top of James Slatic’s, the owner of Med-West Distribution, bank accounts and those of his wife and two teenaged daughters frozen. Washington where it has been legal since 2012, was the nation’s fourth-largest recipient of the DEA’s marijuana-eradication program funding at $760,000 in the year 2016.
These are taxpayer funded efforts performed by the DEA mirroring a scene from an action movie thriller where dozens of men in heavy armored uniforms jump out of helicopters, roll up in armored vehicles, wielding guns and sledgehammers ready for war. What are they searching for? Well, they’re searching for marijuana plants, recreational and medicinal store fronts, people on-scene, investors, taxpaying citizens running legal operations abiding by the state governing laws. While tax paying citizens are funding the federal marijuana-eradication program each plant eradicated and product seized costs that state taxpayers money. State citizens respond to these actions by gathering signatures, presenting majority votes to state legislature providing proof of legal operations, creating solid infrastructures for cannabis businesses to hold each other and their customers accountable within their state and city limits. Nonetheless, DEA raids continue, taxpayers money battling taxpayers money with no end in sight for this ongoing feud.