Cannabis and Crypto, Is It Time for A Joint Venture?

Market Meditations | September 7, 2022

Crypto and the cannabis industry may seem like a no-brainer duo. After all, they certainly aren’t strangers. Silk Road memories probably come to mind, but there are legitimate ways these two industries could cross paths. Is it a match made in heaven or another dysfunctional relationship waiting to happen?

  • Although many states in the U.S. have pushed to legalize medical and recreational marijuana, the federal government has yet to change its tune about cannabis.
  • The most well-known issue facing the cannabis industry is its lack of access to banking. Due to the federal laws prohibiting its use, sale, and manufacturing, even legitimate companies have difficulty accessing capital or accessing a place to deposit their funds. This is where decentralized protocols could really shine and help the cannabis industry.
  • Another issue facing pot pioneers is the tax code – an area most crypto enthusiasts are already familiar with. Fortis Law Partners, a Colorado-based law firm, estimates that cannabis companies pay an average tax rate of 70%, compared to a much lower rate of 20% for traditional businesses. If cannabis companies choose to utilize crypto, they not only have to deal with the volatility of digital assets but also the tax implications they come with.

The truth is that whether or not the two belong together should probably be decided on a case-by-case basis. Cannabis companies must assess their own unique obstacles and determine if there is a crypto solution. In the meantime, the two industries can run parallel with some occasional intersections.