By Mark Goldfogel
There has been quite an uptick in the discussion of BitCoin as an alternative to fill the banking need for cannabis.
I do not believe it is even a temporary solution to the problem.
Since Colorado created a “for profit” model for cannabis distribution, every aspect of this industry has been subject to invasive government oversight. “Seed-to-Sale tracking,” which I helped to develop, created a paradigm that uses technology to cover every movement of the plant on its way to market.
To add an alternate currency at the end of the transaction further muddles the legitimate sale of cannabis.
However since every state is legitimizing adult use differently, the potential need for an alternate currency exists, especially for the black and gray markets. BitCoin will not provide any protection from drug trafficking prosecution, or seizure, but is popular for exactly that.
Every dollar needs to be transparent and accounted for
I do not endorse BitCoin for cannabis because I want every last dollar of this industry accounted for and taxed and regulated, without obfuscation. That is the safe and transparent way to build a new industry.
While my BitCoin account only has $6.32 worth of BitCoins in it today, it started with only $2.00 a few months ago when I started researching this alternative currency and opened an account just for fun. But, its value can vary dramatically.
Let me try to explain BitCoin based on my very limited knowledge.
Imagine that we live in a world where anyone who wishes can use their own form of currency (one such example is called BitCoin). But this currency is not controlled by any government. It is traded primarily through the Internet and establishes value by supply and demand.
One person sends currency, the other receives it. A transaction can’t be reversed and can’t be altered. It is amazingly simple, fast, cheap, and transparent.
The real magic is in the system that keeps track of these BitCoins and other currencies called the Block Chain. This system tracks, generates and limits the creation of BitCoins. This, in turn, creates and maintains value. If you recognize that the American Dollar is only backed by our country’s belief in its value, you recognize the resemblance.
The ultimate difference between BitCoin and the U.S. dollar is the belief in the American government.
What is backing BitCoin as a currency?
A fiat currency is any currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of, or backed by.
In this way, a currency has only the value that we believe it has. When we had the huge recession in the 2008, the U.S. poured trillions of dollars into our economy to avoid a loss of confidence in the U.S. dollar. Quite frankly the process worked amazingly well and our economy has rebounded from a heart attack that could have been fatal to our currency, and with it, our economy.
The problem is that I am not sure we really learned our lesson.
Like a heart attack victim who recovers and feels great, going back to fatty foods, stress and smoking will just create another catastrophe. For this reason, a prudent person may well dabble in BitCoin, but the Cannabis Industry will continue to do business primarily in cash.
Fiat currency used to be backed in precious metal, now it’s backed in trust. This article comes across as extremely misinformed to the fact the blockchain is a completely public and transparent ledger whereas cash can be ethereal and easy to hide or launder. The author doesn’t once touch on the fact of how incredibly hard it is to bank for the cannabis industry or how difficult it is to pay taxes. The author is most likely unaware that fiat currency can exist on the blockchain as well in the form of an Open Asset. If the author is serious about taking a stance on such things, they should probably consult experts in the field and do actual research before writing opinion fluff pieces.
Marshall, the author, Mark Goldfogel, is well versed in banking laws in not only Colorado but many other legal cannabis states. As his bio points out, he was a co-founder of MJ Freeway, the cannabis industry’s first “Seed to Sale” point of sale system and then went on to become CEO and co-founder of C4EverSystems, the industry’s first cash management system. Mark currently is EVP Industry Relations for The Fourth Corner Credit Union, the first state chartered institution whose field of membership includes people and businesses with a common interest in cannabis and hemp. The credit union is currently in a law suit demanding equal access to the payment system for cannabis supporters. He has written many pieces in CBE about the industry’s significant banking challenges over the past year and a half. In light of full and equal transparency that CBE subscribes too, please share your credentials with our readers, I am sure they will find that useful as they have found Mark’s commentary and opinions since he helped launch CBE?
Rob Meagher
Well versed in banking laws but not on laws regarding cryptocurrency, the tech that underlies it, or viability of it’s mainstream adoption which is what this article is about. Also, it would be important to note the author has a vested interest in the cash management business which he should have divulged at the beginning of the article, but I digress. http://lmgtfy.com/?q=marshall+hayner
Let’s call a spade a spade Marshall Hayner. As the founder and owner of a California Medical Retail establishment, Trees, me thinks its your business that offers BitCoin as a transaction solution that is the one with the vested interest. Why, you have even endorsed it here…https://www.cryptocoinsnews.com/trees-ceo-marshall-hayner-cannabis-will-bigger-industry-big-tobacco-needs-bitcoin/.
Instead of dropping inaccurate accusations about a respected member of the cannabis community, why don’t you take CBE up on my offer to publish a 600-800 word piece that you author for our readers and your peers on why you think Bitcoin should be a viable alternative for the Cannabis Industry?
“I do not endorse BitCoin for cannabis because I want every last dollar of this industry accounted for and taxed and regulated, without obfuscation.” — Bitcoin has a public world wide ledger where ALL transactions can be seen. The choice to reveal your Bitcoin transactions is no different from the choice to open your cash register to the rest of the world. To insinuate that people using Bitcoin instead of regular cash will suddenly make a different choice, is simply misleading. Misleading, because the author seems well aware all Bitcoin transactions are being tracked on the Blockchain::
“The real magic is in the system that keeps track of these BitCoins and other currencies called the Block Chain. This system tracks, generates and limits the creation of BitCoins. This, in turn, creates and maintains value. If you recognize that the American Dollar is only backed by our country’s belief in its value, you recognize the resemblance.” — The belief is indeed the resemblance, but don’t overlook the differences. The US dollar doesn’t track, generate or limit the creation of dollars. Very much unlike Bitcoin.
The whole premise of this article is wrong. As young and fledgling as Bitcoin ecosystem is, there are many exchanges that LEGALLY allow you to hold reserves denominated in dollars. If one were worried about the volatility of bitcoin’s price, they could simply trade bitcoins for dollars (or any other currency) on these exchanges.
The main problem that many industries have in employing bitcoin as a currency is that they cannot fund a full production loop with bitcoins. Even if all customers paid for products in bitcoins, suppliers typically won’t accept bitcoin as payment. The advantage of the MJ industry is that its production cycle has a relatively small number of players. Furthermore, most of these players are typically gathered in the same geographical region. These are the reasons why the MJ industry could potentially benefit from the use of bitcoin. Not just to aid the management of large cash profits, but also as a means to spur a closed loop production/consumption cycle all funded through bitcoin.
Just my two cents
Very good point you made there. Even though the businesses can’t get bank accounts, the private individual workers (suppliers and employees of resellers) surely have bank personal accounts. If they would accept to receive their salaries in Bitcoin (the unit of account can remain USD, to pre-empt the volatility of Bitcoin), the problem is solved. The individuals can simply exchange their Bitcoin for USD through the regular exchanges or brokers (Coinbase, Circle, etc.). Then, the industry has solved its cash problem. What remains is to seduce customers to pay with Bitcoin. An attractive discount on the price as introduction will certainly help.
I will take the founder up on writing a short article this week seeing as this one has spread so much misinformation. It’s good to see the commenters not buying it. As far as paying employees there are two amazing options that are live right now 1) bitwage.co 2) shiftpayments.com both services will allow you to stay in USD and have your employer pay you in BTC. Purchasing Bitcoin painlessly for the consumer is the tricky part in closing the loop.
Jamie Redman of Bitcoinist.net beat me to it 😀
http://bitcoinist.net/cannabis-executive-doesnt-understand-bitcoin/