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High Risk, High Reward: The Cloudy Future of Cannabis Banking

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cannabis banking, cannabis bank, cannabis safe banking act, marijuana related business

JACKSONVILLE BEACH, Fla – As the legalization of marijuana continues to roll up across America, the cannabis industry faces several risk factors that could nip their progress right in the bud. In light of the latest collapse of several U.S. banks such as Silicon Valley Bank (SVB) and First Republic Bank (FRB), cannabis banking and marijuana-related business appear to be en route to a painful comedown. 

With Every High Comes A Low

The recent wave of marijuana legalization has spurred investment in cannabis banking, partly thanks to a synchronized effort to push for the passage of legalization bills across America. However, every high has its corresponding low to come. The rushed legalizations in some states have opened up room for loopholes in the law, which are currently being exploited. A good example is the rise in synthetic marijuana production. Synthetic marijuana can trigger severe reactions in users as these chemical concoctions. This newfound black market pushing cannabis synthetically derived from hemp products appears to have the upper hand against retailers who have legally obtained licenses. 

Aside from the hemp black market, marijuana trafficking outside the U.S. has shown to be a potential source of conflict with the international community. It is true that legalization has taken the spotlight away from the usual illegal trafficking issues. However, illicit U.S.-sourced cannabis has been found to be making its way outside the U.S. In its 2022 report, the United Nations International Narcotics Control Board rallied against the legalization of non-medical marijuana due to the alarming rate at which the illicit market is growing. The repeated failure to comply with legal obligations on an international level may be another potential thorn in the side of the cannabis industry.

Lastly, in spite of the surge in legalization, the cannabis industry still cannot claim federal legal support. The U.S. Food and Drug Administration, or FDA, has not yet certified compliance for many influential cannabis companies. Instead, these companies are backed by state-level support, which will not stand under pressure from the FDA when the time comes.

With all these risks, what would it mean for a cannabis bank? The cloud of uncertainty hovering over the industry may prove deadly for the middle-tier banks which have taken on the cannabis industry. The potential collapse of the cannabis industry due to these risk factors will spell doom for many banks, especially those who banked on psychedelics and cannabis as high-risk, high-reward industries. 

Growing Support for SAFE

The Secure and Fair Enforcement Banking Act is now widely recognized. On a federal level, marijuana would not be officially legalized by the legislation. The SAFE Banking Act would instead forbid federal authorities from punishing depository institutions for offering financial services to state-legal cannabis firms.  Additionally, the law will reclassify the proceeds from these firms as not coming from illegal conduct, nullifying the implementation of some anti-money laundering rules. 

Currently, there is support for the Secure and Fair Enforcement (SAFE) Banking Act, which could potentially offer protection to financial institutions that service all marijuana businesses operating with state sanctions. This law would enable banks to extend loans, credit cards, and other financial services to such businesses without legal repercussions. Salvation for the banks may finally come, in the form of a cannabis safe banking act such as SAFE. 

At present, the industry of cannabis banking continues to keep itself afloat on the wave of cannabis legalization. It has been featured in most cannabis business news lately. But while it isn’t too late to address these salient issues surrounding the buzz of the growing cannabis industry, legal tensions will continue to hound the cannabis bank until the clouds pass over this legal gray area.

For further cannabis news, do not forget to subscribe to 420CanNews to get ahead on what’s new in the world of weed. 

— Story Filed By 420CanNews Staff

Here’s More Information on the Topic:

Pot’s Legal Purgatory Is Raising New Concerns, From Banks to the UN
https://www.bloomberg.com/news/newsletters/2023-03-20/pot-s-legal-ambiguity-is-an-issue-for-banks-united-nations

Banking Failures Are Hitting Weed Companies, Too
https://www.bloomberg.com/news/articles/2023-03-18/us-banking-failures-are-causing-trouble-for-the-weed-industry?leadSource=uverify%20wall

The SAFE Banking Act’s Potential Impact On The Marijuana Industry
https://www.forbes.com/sites/dariosabaghi/2023/01/24/the-safe-banking-acts-potential-impact-on-the-marijuana-industry/?sh=743619a25d31