The Secure and Fair Enforcement (SAFE) Banking Act, which, in March, passed the U.S. House Committee on Financial Services by a significant bipartisan margin, represents a promising step forward for banks and cannabis companies that want to take sales out of the cash-based market and into the mainstream. Although the ultimate passage of the bill remains uncertain, it’s vital for business owners to educate themselves so they can seize the chance to put the cannabis industry on firmer financial and legal ground.
What would the SAFE Banking Act do?
The SAFE Banking Act is designed to shield banks and credit unions that work with cannabis companies from legal penalties. Specifically, it would bar federal regulators from terminating a bank’s FDIC deposit insurance, a threat that has thus far prevented most banks from accepting cannabis business.
With the bill’s passage, it’s likely that more banks would open their doors to cannabis businesses. In turn, cannabis business owners would be able to open checking accounts and credit cards, and otherwise operate as normal businesses. Banks could even provide other services, such as payroll, creating a much-needed layer of accountability, transparency, and stability within the industry.
However, these changes wouldn’t happen overnight. Before accepting cannabis accounts, banks would need to meet certain compliance and reporting requirements, a process that could take several months.
How would legal banking change the cannabis industry?
If the SAFE Banking Act is passed, it would likely drive down the costs of cannabis financial services. Currently, the few credit unions that handle cannabis accounts charge significant premiums to compensate for the elevated risk and compliance costs these accounts represent. With increased competition from banks, premiums will inevitably decrease, reducing financial pressure on cannabis companies. [Read More @ Cohn Reznick]