The state of Arizona has accepted a blockchain-based, cannabis industry-oriented payments solution into its fintech sandbox.
According to a recent press release from the Office of the Attorney General, the company — called Alta — is a cash management solution for licensed medical marijuana providers and vendors. The Arizona-based financial services startup intends to offer a stablecoin that is pegged 1:1 with the United States dollar.
During its sandbox testing phase, Alta will trial its member onboarding and remittances platform. The end goal of the platform is to let users pay for goods and services using the stablecoin instead of fiat money.
Banking problems for the cannabis industry
Cannabis, while legal in some states in the U.S., is still considered a controlled and illegal substance by the federal government. As such, banks are hesitant to deal with cannabis-related business as it would be grounds for the government to revoke their federal deposit insurance, which is a crucial financial safety net for banks.
Sarah Wessel, the co-founder and COO of Alta, said that this blockchain-based service can provide a crucial financial service and make local communities more safe:
“The cash economy for legal cannabis in Arizona exceeds $350 million annually [...] These are legitimate companies, innovators and entrepreneurs that are forced to operate in cash. We offer them peace of mind. Our digital payment technology lifts the burdens of having to operate solely through cash and makes our communities safer.”
Other crypto business and state governments have tried to bridge the gap between the cannabis and financial services industries. In 2017, the Dash network began paying the firm Alt Thirty Six to integrate Dash as a payment option in the cannabis industry’s point-of-sale systems.
From the legislative side, lawmakers in the state of California proposed a bill in February that would accept crypto for tax payments from cannabis-related businesses. The bill, which has not moved out of committee since March, aimed to relieve tax offices from the large piles of money brought in by cash-heavy cannabis businesses.
Arizona Fintech Sandbox
Arizona became the first state to introduce a regulatory sandbox in March 2018. Republican Congressman Jeff Weninger reportedly sponsored the legislation behind the sandbox. Weninger commented on the potential broader use cases in today’s press release, saying:
"It's exciting to have Alta as the newest participant in Arizona's FinTech Sandbox. There's huge potential for stablecoin technology in cash-intensive businesses around the world, and Arizona is fortunate to play a critical role in the development and growth of this emerging industry."