By Jose Rodrigo Safdiye
Since the eruption of altcoins, the crypto space has experienced a wide variety of wonders and unexpected events. Smart contracts, Lighting network, DeFi, scams, bubbles and failed projects to name some of the most obvious. In the midst of this frenzy, a fascinating concept appeared: Cannabis Crypto.
Some view these tokens as a possible solution to the cannabis industry’s banking problem that stems from the DEA’s outdated Schedule I status of marijuana as a controlled substance thus making it impossible for the entire industry to access banking institutions, essentially forcing cannabis companies to operate outside of insured banking systems.
As such, many are wondering if cryptocurrency might be the solution the industry is seeking. Might this be the way to bypass regular banking systems without a federal bill?
Presently the relationship between cryptocurrencies and cannabis is in its infancy but will likely unfold and flourish in the near future as crypto adoption levels increase and technology becomes more sophisticated.
When examining cannabis-specific crypto, the most established at the moment is POT coin (CRYPTO: POT), a low radar alt-coin that experienced a huge pump & dump after Dennis Rodman wore a POT T-shirt at his now-infamous public meeting with North Korean leader Kim Jong-un. While the T-shirt, like the meeting itself, made waves internationally, this type of appearance is never healthy for a financial instrument that’s meant to be used as a long-term method of exchange. It now ranks #1135 in CoinMarketCap.
The main issues cannabis tokens encounter are adoption, market capitalization and aiming. Instead of bringing new tech along with innovative proposals, these cryptos fail to confront the problem faced by the industry.
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They also fall short because cannabis cryptocurrencies do not provide any innovation in their technology and are limited to a single industry, thereby narrowing their potential market outreach. A currency must be widely used and desired to be adopted by publicly traded companies.
In Addition, Cannabis Cryptocurrencies Cannot Answer A Simple Question
Why should companies use them?
The fact that they are publicly related to cannabis is not enough. The problem lies in the fact that alt-coins fail to differentiate themselves from other coins. Most companies would prefer to use ETH, BTC, BNB, USDT, or any of the other top 25# Crypto.
It would be unwise for a cannabis company to rely on any of the existing “Cannabis Crypto.”
We asked Tyler Beuerlein, Hypur’s chief revenue officer, why his company did not utilize crypto when undertaking its daily financial transactions as a way to bypass the banking system.
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“Combining one highly-regulated product with another highly-regulated industry is a non-starter for banks and regulators. A company’s dependence on crypto could negatively impact its financial operations in the face of numerous potential consequences. They could suffer from unpredictable value fluctuations, increased tax liability, and even the loss of a company’s bank accounts or banking partnerships,” Beuerlein told Benzinga.
“It is likely much riskier for a business to use crypto to bypass traditional banking. Cryptocurrency actually needs banking because the funds associated with digital assets eventually must be converted into traditional currency. Moreover, contrary to popular belief, the vast majority of legal cannabis businesses are in fact already banked anyway.”
What About The Future?
A possible way for the industry to adopt a specific blockchain-based token could be to form strategic partnerships with well-positioned companies. This would make the token more stable and ease the way for smaller businesses to also adopt it. If this is not the case, businesses would tend to choose non-cannabis-specific tokens or other financial instruments.
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Blockchain technology also provides cannabis manufacturers with the possibility of precisely tracking their production process from seed to sale, therefore guaranteeing customers quality control and vigilant product supervision.
“Unless central banks begin to tokenize their currencies, due to their practicality, immediacy, and cost-saving, I believe that so-called stablecoins have a chance of slowly joining in international trade operations,” Franco Amati, co-founder of NGO Bitcoin Argentina and Signatura, told Benzinga in an exclusive interview.
“For the rest of what we call ‘crypto,’ although tech will continue to progress, in the near future it won’t stop being a niche tool.”
As for now, unless someone comes up with a way to revolutionize the market, cannabis-specific cryptos remain impractical for the industry. Nevertheless, dispensaries would be wise to provide crypto payment methods to customers who choose to follow that financial trend.
Unlike cannabis, which has been consumed since the dawn of civilization, crypto is new to humanity. As it develops and evolves, it will no doubt deepen its link to the cannabis industry. For the moment, traditional financial services remain the best option to provide what the industry requires. As such, cash is still king when it comes to cannabis sales.
This article originally appeared on Benzinga and has been reposted with permission.