It is no secret that the medical marijuana industry in the United States faces an uphill struggle, indeed our readers will remember that we covered the issue in detail recently and discussed how dependence on cash is putting both medical marijuana businesses as well as consumers at a great deal of risk.

It is interesting to note that there have been developments in this field and there is now a payments solution at hand for regulated medical marijuana businesses as well as customers.

CanPay has recently announced a solution for the legal marijuana industry that has become available to users as well as businesses in the states of Washington, Oregon and Colorado. If this solution does indeed get adopted en-masse, it promises to solve the industry’s cash-only problem.

Why no banking love for marijuana

The problem in the United States arises from the dichotomy in laws. While in many states the use of medical marijuana is now allowed, federal law still acts as a spanner in the wheel. The banking industry is thus wary of being on the wrong side of federal law and the industry is largely unorganized.

Consumers who want to access medical marijuana in states where it is legal, have to either withdraw cash from an ATM or rely on businesses accepting credit or debit cards till the time they are not ‘discovered’ by the payment processing banks.

CanPay App enables cashless purchase of medical marijuana

CanPay, a Colorado based company, has recently released a debit payment application that promises to change all of that. Consumers can download the application and it can be connected to their checking accounts, which allows direct payment from the account to the retailer.

There are no debit or credit cards involved. In one fell swoop CanPay has basically solved the cash problem that accompanied the operation of a medical marijuana business.

We talked with CanPay CEO Dustin Eide who tells us:

“With the conflicts between state and federal laws, financial institutions have been hesitant to provide financial services to the regulated cannabis industry. This means that many cannabis businesses either do not have access to any banking services or must hide the nature of their business to obtain access.”

He adds:

“However, there are a number of financial institutions across the United States that have built cannabis banking programs around the Cole Memo and FinCEN Guidance (updated 2/14/2014), which combined provide the path for these institutions to offer legitimate banking options to cannabis businesses. To provide the CanPay payment services to retailers, we utilize a multi-state network of financial institution partners offering compliant cannabis banking programs. This helps ensure all purchases processed through the network are transacted as part of a compliant banking program.”

CanPay is opting to go traditional instead of Blockchain

The application that CanPay offers is currently only aimed at marijuana users but in principle this payment solution can be utilized by any merchant. The list of participating retailers is available here and can also be accessed through the CanPay app at CanPay App.

While we would have loved to have seen a Blockchain or a cryptocurrency based solution, CanPay is a regular payment network. However as Dustin Eide says, Blockchain based attempts would be welcomed by his company as well.

He puts it:

“We respect any attempt to create legitimate financial services solutions for the regulated cannabis industry, including those working with Blockchain technology.”

He further adds:

“While the Blockchain holds promise for tracking and recording information, any payment solution that hopes to provide services to the highly-regulated cannabis industry while operating outside of traditional banking channels is going to experience additional challenges that a service like CanPay, which relies on existing banking infrastructure, does not encounter. This includes both additional requirements around tracking and compliance and overcoming concerns regarding the mixing of the cannabis industry, with its conflicting state and federal laws, with an emerging technology facing an uncertain regulatory future itself.”

CanPay can change the marijuana scene

CanPay has the potential to take the danger out of regulated marijuana operations. Violent crime has been a factor in the past because criminal elements are aware of the cash rich nature of marijuana operations.

It is indeed a pity that regular banking channels have not shown the enthusiasm to service an entire industry because of the way they read the law.

However, this is indeed a case which does show us that when the unbanked need services, there is a potential for new ideas and systems, which can then step up to meet the needs of the hitherto unbanked.

Eide concludes by saying:

“By providing an option to “de-cash,” CanPay is helping make the regulated cannabis industry safer and more transparent while providing a convenient and familiar shopping experience to cannabis consumers.”