US Senate President Chuck Schumer’s recent pledge to lift the federal ban on cannabis may have an impact on bitcoin (BTC) and the broader cryptocurrency sector.
Schumer and Democratic Senators Ron Wyden and Cory Booker issued a joint statement on Feb. 1 expressing their intention to radically reform cannabis laws at the federal level. The statement notes the disproportionate impact of the war on drugs on people of color. He said:
The war on drugs is a war on people, especially people of color. Ending federal marijuana prohibition is necessary to right the wrongs of this failed war and end decades of damage to communities of color across the country.
Even in states where cannabis is legal, dispensary owners are still forced to operate outside the traditional banking system. So far, the federal ban has made most banks unwilling to take the risk of doing business with cannabis stores, forcing owners to conduct their business in cash.
Cryptocurrencies and cannabis came of age in the same decade, especially with legalization in the US. Both have traditionally faced the same difficulties in gaining public acceptance, whether from legislators and regulators or even the general public.
Perhaps we shouldn’t be surprised that cryptocurrency projects have jumped into the breach to fill the void left by banks in the legal cannabis industry. Along with the emergence of many marijuana-inspired cryptocurrency tokens and the rise of blockchain technology used to shake up the supply chain of seeds for sale, the rise of crypto-technology in the cannabis industry has also given dispensary owners an alternative to cash payments and the ability to store assets.
But if cannabis were indeed legalized at the federal level, what would happen to the growing link between cannabis and crypto? Are cryptocurrencies actually looted when used?
Michael Wagner, CEO of Multichain Ventures, a provider of blockchain payment solutions for the cannabis industry, told Cointelegraph that acceptance by conventional banks could negate the need for entrepreneurs to use cryptocurrencies. Wagner stated:
As for the utility of cryptocurrencies, I agree that the appeal of a blockchain-based solution diminishes when traditional financial centers open their doors to these companies.
According to Wagner, however, the impact of such an event can be missed, as the lack of legal clarity around crypto has made it difficult for cannabis consumers to buy in until now.
In my experience, in countless conversations with cannabis operators, cryptocurrencies are not widely used, despite the friction that exists in the financial services industry today. The lack of clarity on the legality of crypto, as well as the lack of understanding of the technology, has created a significant barrier to entry.
The effort to create a digital payment system for the cannabis industry, in which Multichain Ventures worked with the state of Nevada on a blockchain pilot project, is an example of an attempt to break that barrier, according to Wagner.
But regardless of the legal status of cannabis, Wagner says the use of cryptocurrencies comes with its own benefits and is not just a way to store wealth.
Moreover, our internal thesis was and is that decentralized financial ecosystems themselves offer significant benefits … While traditional banking would compete, the innovation that is cryptocurrency continues to outperform in almost every area. Faster and cheaper quotes. Greater transparency.
Wagner says he supports the call for cannabis legalization and believes cryptocurrencies will find their way regardless:
I fully support expanding access for cannabis companies through legislation, but I think we’ll find attractive uses for cryptocurrencies either way.
It is estimated that the legal cannabis industry will be worth about $20 billion worldwide by 2020, even with the blockade of COWID-19. It is estimated that the value of cannabis sold on the black market is more than ten times higher.
Senators Schumer, Wyden and Booker plan to introduce a reform bill in early 2021. Many cannabis stocks rose after the official announcement.
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