US blockchain startup hopes to solve cannabis industry's banking problems

Rage Comment : Although some states in the United States have legalized marijuana, the reality is that the banking industry has many restrictions on marijuana companies and almost no banking services are provided to them. As a result, marijuana transactions still use traditional cash transactions, which makes settlement difficult, and the primitive accounting method also often leads to disputes in transactions. In order to change this situation, several blockchain start-ups in the United States hope to use blockchain technology to provide banking services for the marijuana industry. These include Colorado Tokken and Cannabis Hemp Exchange.

Translation: Annie_Xu

The federal bill would make legal marijuana operators look like drug dealers.

Although the nearly $7 billion marijuana industry continues to grow, federal prohibition and medical marijuana approval laws have prevented many operators from getting bank accounts or credit cards. Banks regulated by federal law often refuse to accept profitable customers because the product is classified in the same category as heroin.

Now some start-ups are beginning to use blockchain technology to help companies in the industry conduct transactions, using digital currency to change the current situation where 75% of cannabis businesses still rely on cash. Although the Department of Justice and the Treasury Department have stated that banks should provide services to cannabis businesses that comply with state laws, this has not been implemented.

Lamine Zarrad

Lamine Zarrad says:

“Because transactions are mainly conducted in cash, and the transaction ledgers are pieced together by everyone in the cannabis industry, there is no way to guarantee the authenticity of the transaction information, so it is ultimately difficult to unify the transaction information.”

Zarrad is the founder of Colorado-based Tokken, which provides online banking services to cannabis businesses, using blockchain ledgers to ensure data authenticity and compliance.

To use the service, you must first download the app and link it to a bank account or credit card; then you can pay with a mobile wallet, such as Venmo. Transaction information will be recorded on the Tokken blockchain ledger, and retailers will receive a corresponding number of Tokken tokens, which are only applicable to the company's system. Retailers then use these tokens to pay suppliers or growers, who can use the tokens or exchange them for US dollars.

Zarrad described blockchain as a series of algorithms that compete to keep accounts and allow transactions to follow compliance guidelines. The authenticity of user information can be guaranteed in real time, while individuals using the service monitor transactions. "This is the most secure and stable system at the encryption and mathematical level."

At the same time, because blockchain uses a third party to store transaction history, regulators and law enforcement agencies can intervene in investigations and use the Tokken system to query all transaction activities. "Ultimately, they rely on us to ensure the authenticity of transactions, and the security of blockchain can eliminate uncertainties."

Although this digital method is less private than cash transactions, blockchain mathematical algorithms can encrypt data.

CHEX (Cannabis Hemp Exchange) is also a blockchain startup that uses blockchain technology to verify cannabis wholesale and retail. The company's blockchain can ensure the decentralization of data and store it on multiple servers.

Eugene Lopin, co-founder of CHEX, said:

"Blockchain is trustless and provides transparency and audit capabilities for cannabis retail activities." When there is no need to rely on a company to guarantee the authenticity of the data, the data is trustless.

Regulators can view transactions on the blockchain without sending audit requests to the company's central server, which is cumbersome and requires special access. Although CHEX does not have a token, it provides a data and information storage system; as more and more states in the United States begin to regulate medical marijuana and adult use of marijuana, this system will become increasingly important. Regulation may require transaction tracking or catalog audits, but it is difficult to track with so many origins and product batches.

Lopin said:

“If there’s a lot of data and regulators want to see it, this can directly achieve transparent data; you can tell them that the company is honest.”