Bitcoin for the legal cannabis industry
Thursday 03 September 2015
Illegal drug markets have shaped bitcoin’s early years. Legal ones might be the next big step in its mainstreaming.
In the last article we looked at what bitcoin has to offer the legal and medical cannabis industry. Given bitcoin’s early years as the currency of choice on the Silk Road and other darkweb markets, you might think that the benefits came down to improved anonymity, but that’s not the case. In fact, it’s about basic money transfer. Simply, regulatory issues mean that legal and medical marijuana businesses can’t easily secure banking facilities - cannabis use is regulated on a state-by-state level, but banks are regulated at the federal level, so they don’t like to touch these outfits. That’s a problem when the alternative is keeping hundreds of thousands of dollars on the premises.
America's legal and medical marijuana industry is being hamstrung by a lack of banking facilities
Cheaper and more flexible
This is the primary problem that cannabis tech companies are aiming to address using bitcoin. The deal is that customers use BTC to pay, and merchants immediately receive payouts in bitcoin. No waiting around for transactions to process, just fast and simple payments. For customers, the savings are passed on, meaning cheaper products.
Bitcoin addresses a banking problem for the MJ industry, but choice is never a bad thing for consumers. One site I saw allows customers to pay by credit card and PayPal as well as bitcoin. The difference? Well, the benefits of using bitcoin are so great that that they want to incentivise customers to use it over the alternatives. Moreover, as a decentralised protocol, it doesn’t have the charges that traditional payment processors do. So a PayPal purchase will cost you 5% more that one in bitcoin - and a credit card payment will be 20% higher. That’s a very good reason to explore a new technology.
Make no mistake about it: this is a big deal. Bitcoin entrepreneurs are taking aim at a $3 billion industry that has no easy access to banking facilities - and the legal/medical marijuana sector could be ten times that large by 2020. Bitcoin has something unique to offer here. That is a recipe for disruption.
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