Digital cryptocurrency, of which Bitcoin, Ethereum, and Ripple are some of the more well-known examples, has drawn more than its fair share of attention in the news recently as the value of quite a few currencies have shot up exponentially over the past year. However, less well-understood are the handful of cannabis-focused cryptocurrencies that have been created to help solve the banking problems faced by cannabis businesses operating in the grey area between state and federal law.

Thanks to federal prohibition, few banks will accept cash from cannabis businesses, forcing business owners to look for alternative ways of handling these transactions. Not only are there dangers and safety concerns associated with doing business entirely in cash, but cannabis companies can face penalties for paying their (extremely high) taxes in cash, despite being unable to use traditional banking and credit. Cannabis businesses that work directly with the plant, such as dispensaries, are also prohibited from deducting legitimate business expenses. According to the nonprofit advocate group New Federalism Fund, this means cannabis companies can effectively owe a tax rate as high as 65 to 75 percent.

Cannabis Cryptocurrency Bitcoin Ethereum

Cryptocurrencies offer an interesting avenue for these businesses to solve their cash problem, and, as we will discuss shortly, several currencies have already surfaced to fill this demand. However, many cannabis CEOs warn that cryptocurrency is the wrong direction for the industry. For one, these CEOs hope that cannabis businesses will be able to access mainstream banking services in the near future, and they say cryptocurrencies, which can obscure the already complex data they must report to regulators ensuring none of their product reaches the black market, could open the door to meddling by federal authorities.

Speaking to Green Market Report, Chicago dispensary owner Zachary Zises said:

"We have too many strict state and federal standards to meet, and right now, the cryptocurrencies don't allow us to meet those high standards."

However, some of the cannabis cryptocurrencies have nonetheless managed to gain a degree of traction in the industry.

 

Cannabis Themed CryptoCurrencies



Among the first to launch was PotCoin, which hit the market in 2014, according to Investopedia, riding the wave of Colorado’s successful legalization effort. A PotCoin ATM was even installed in one dispensary there, but until last year, the currency failed to gain much traction. It finally gained media attention in June of last year when the company funded Dennis Rodman’s trip to North Korea. A press release included video of Rodman wearing a PotCoin shirt, and PotCoin’s value went up 76 percent in the following day. Its price has increased from $0.004625 in early 2014 to eventually reach its current price of around $0.174.

PotCoin is, appropriately enough, limited to a supply of 420 million coins, 217 million of which are currently in circulation. Since it adopted the Proof of Stake method, investors in PotCoin can now earn a 5 percent return annually on PotCoins. The market cap, which is the amount of regular currency (dollars, for example) invested in a given cryptocurrency, is near $40 million for PotCoin. It has increased from just $81,547 in February of 2014.

By boasting its fast transaction time of 40 seconds, compared to up to 10 minutes for bitcoin, and leveraging its appeal to those who want to support the industry as a whole, PotCoin is working to revive hype after a period of relative inactivity.

Another early entry into the cannabis cryptocurrency market, CannabisCoin is an open source currency geared toward transactions at medical cannabis dispensaries. In fact, the currency is aiming to be directly redeemable in actual cannabis, with a line of medicines and strains specifically geared toward an exchange rate of 1 gram for 1 CannabisCoin. A total of 91.8 million CannabisCoins exist, more than 77 million of which are in circulation. The current price for CannabisCoin is $0.0964, and its current market cap is $7 million.

Hempcoin logo

Hempcoin logo

HempCoin was also created in 2014, but this cryptocurrency is geared towards growers and dispensaries rather than individual use by patients and customers. According to their website, the company hopes to "facilitate transactions between marijuana farmers and the local dispensary shops." Currently, it is priced at around $0.248, and has a market cap of over $57 million, the highest of all of these cannabis cryptocurrencies.

CannaCoin, yet another cannabis cryptocurrency that started in 2014, is currently priced at around $0.0945 with a $444,000 market cap. According to founders, CannaCoin was started by "a group of cannabis enthusiasts working towards the future development of cryptocurrency applications related to cannabis production, seed production, extract production, glass blowing facilities, vape and dab station manufacturing, crypto development, and more."

Finally, DopeCoin, founded in 2014 by Adam Howell, has a "mission is to provide marijuana enthusiasts with a modern and secure way of doing business for the 21st century,” according to its website. With 117 million of its 200 million coins in circulation, it has a market cap of about $10 million and a price of around $.0908 per coin. It also uses the Proof of Stake method, allowing investors to earn a 5 percent return annually.

Whether there is a future in cannabis cryptocurrency depends on a multitude of factors, including whether the cannabis industry is allowed access to traditional banking in the next several years as well as the progression of the cryptocurrency market in general. Many business owners have described a hesitance to get involved in cannabis cryptocurrency, as it adds another poorly understood “x” factor to an industry which already operates with more than its fair share of uncertainty and risk. Additionally, without a large section of the industry moving to embrace cannabis cryptocurrency so far, it faces an uphill battle towards success. However, if traditional banking remains off-limits to the industry for years to come, cryptocurrency could potentially catch on as a way to solve ongoing financial problems.