Bitcoin Is Helping the Pot Business Get Over Its Banking Problem

Bitcoin Is Helping the Pot Business Get Over Its Banking Problem
by Jennifer Kaplan
June 13, 2017, 2:00 AM PDT

Cannabis companies are turning to the world’s most popular digital currency in an effort to get rid of all that cash.

The inability to access traditional financial institutions is one of the marijuana industry’s biggest impediments. Legal cannabis was a $6 billion industry last year and is expected to grow to $50 billion by 2026, according to Cowen & Co. But because pot is illegal under federal law, big banks and credit-card companies steer clear. That’s forced most merchants to accept cash only, a logistical headache and constant security threat.

Enter bitcoin, the cryptocurrency that consists of digital coins “mined” by computers solving increasingly complex math problems. At least two financial-technology startups, POSaBIT and SinglePoint Inc., use the cryptocurrency as an intermediate step that lets pot connoisseurs use their bank-issued credit cards to buy weed.

“There’s no industry — whether it’s the production and sale of cannabis or the production and sale of a cup of coffee — that can operate safely, transparently or effectively without access to banks or other financial institutions and traditional services,” said Jon Baugher, co-founder of POSaBIT, whose technology is used by 30 dispensaries in Washington state. “That’s where we thought we could leverage the use of digital currency.”

Trove Cannabis, one of the Washington stores using POSaBIT, sold $3 million of marijuana last year — in cash — and does close to 3,000 transactions weekly. Trove became a POSaBIT customer in February after being on a waitlist for six months, according to Yin-Ho Lai, Trove’s founder and chief executive officer. Since doing so, about 13 percent of customers have chosen to pay with credit or debit cards, Lai said, and those who do tend to spend more.

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CompTIA Certified, and bitcoin hobbyist.

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