The legal cannabis industry in California is struggling to compete with the black market. To add to its woes, are obstacles in the form of baking access and high taxes.
Thus, California Lawmakers are considering a bill that would allow setting up state-chartered banks and credit unions, which will help legal businesses with ‘some’ of their banking needs.
State Senate Bill 51, the proposed legislation, would bestow upon private banks and credit unions the freedom to apply for limited-purpose state charter so that they can provide depository services to licensed cannabis businesses.
Since marijuana is still federally illegal, financial institutions do not run the risk of providing basic banking services, including loans, to even legal cannabis businesses. Because of this situation, Marijuana businesses, including pot shops, are forced to deal predominantly in cash.
To tackle this situation, a bill is already underway at the federal level; though, it is not yet clear how long it will take to finally become a reality.
“We appreciate the state’s efforts on the banking bill; however it may take congressional action to finally provide a solution to this,” said Gavin Kogan, chairman and co-founder of Grupo Flor, a California-based cannabis retail and cultivation company.
The hearing for SB 51 is scheduled for Thursday. Notably, an attempt to pass a similar state legislation failed last year.
If passed, the bill would benefit both the businesses and the government in two ways:
- The involvement of large amounts of cash can make marijuana businesses, their employees and their customers a vulnerable target for violent crimes. Hence, reducing the dependency on cash will ensure safety for all.
- Banks can help the police in identifying what businesses are legal and what are being illegally operated.
“This remedy is by no means the ultimate solution, but it’s just one slight step in the right direction to get some of this money off the streets and into banks.”
Reportedly, 12 new cannabis banks or credit unions would be set up under the new bill, which would require California to hire personnel such as examiners and incur costs of nearly $2 million every year.