ICYMI In Washington State: The Hazy Future of BitCoin and Marijuana

ICYMI In Washington State: The Hazy Future of BitCoin and Marijuana

Our cannabis business lawyers are always gettingpitched on creative solutions to the cannabis industrysbanking problem.Because marijuana is still federally illegal, most banks will notprovide financial services to marijuana businesses, even thoughFinCEN issued guidelines to allow financial institutions to provide bank accounts to the state-legal pot businesses.Many toutBitcoinas the solution.

Bitcoinis viewedas the worlds first completely decentralized currency. Unlike the Dollar, the Euro, the Yuan, etc., no central government manages or backs Bitcoin. It is also called a cryptocurrency a digital currency that uses encrypted services to generate units of the currency and to transfer funds. You can read primers on it here and here. Using a Bitcoin walletenables customers and businesses to engage in transactions without using paper currency and without going through an intermediary institution like a bank. Its chiefappeal to the marijuana industry is thatallows for currency transfers with little to no need for a bank. There are thoughsignificant issues involved with using Bitcoin in the marijuana industry and law enforcement associates Bitcoin with the illegal narcotics trade (see the Silk Road).

At the beginning of January, Washington State Senator Ann Rivers (who was instrumental in securing passage of SB 5052, which essentially wound down Washingtons existing medical marijuana cooperative system) proposed a bill toban Bitcoin in Washington States marijuana marketplace. Senator Rivers says that her proposed bill to ban Bitcoin was brought to her by an organization looking to preserve the transparency that we have in our legalized marijuana system in our state. The eight-page SB 5264 adds to the definitions section of RCW 69.50.101 (Washingtons Controlled Substances Act) the term virtual currency, and then proceeds to ban it for marijuana sales. Under the bill, virtual currency would be defined as follows:

a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government. Virtual currency does not include the software or protocols governing the transfer of the digital representation of value or other uses of virtual distributed ledger systems to verify ownership or authenticity in a digital capacity when the virtual currency is not used as a medium of exchange.

The bill then statesthat [a] marijuana producer, marijuana processor, or retail outlet must not pay with or accept virtual currency for the purchase or sale of marijuana or any marijuana product.

The Bitcoin ban bill was debated at length in Olympia and Senator Rivers cited to the Cole Memoprohibiting the shrouding of anyone who participates in Washingtons marijuana industry as its justification. Senator Rivers contendsthat BitCoin cant meet the 2014 FinCEN transparency guidelines ...

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