WeedLex
Feb 6, 2017 12:20 PM

Why Is Virtual Currency Not Suitable for Washington Weed Business?

Washington state is going to prohibit virtual transactions for marijuana companies. The main argument for this is that virtual currency is not transparent enough for the state lawmakers.

On Jan. 25, the Washington state legislators held a public hearing on Senate Bill 5264 introduced by two Senators Ann Rivers and Steve Conway.

The Bill is created to make virtual currency illegal in any pot transactions in the state. This means that marijuana growers, processors, and retailers will not be allowed to pay with or accept virtual currency for selling or buying marijuana or any marijuana product.

While the marijuana industry is on its way to bringing $1 billion revenue to Washington, its financial safety causes many concerns. According to Rivers, there are concerns that bitcoin is not transparent enough to prevent unknown parties from entering into weed financial transactions, as it does not involve any traceability.

Washington state, like any other state that has legalized marijuana, has to ensure that their payment systems are secure from any criminal intervention. If the federal government is satisfied with the state regulation of the marijuana industry, they do not tend to pursue marijuana crimes in the state. However, it is still uncertain whether President Trump will continue with this strategy.

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As the federal law prohibits banks from conducting financial transactions associated with the marijuana industry, weed businesses face troubles with putting their cash into savings institutions. Virtual currency is a great alternative for marijuana companies.

Though there are about 1,000 types of virtual currency, including bitcoins as the most commonly used one, unfortunately, the American government does not support any of them.

Meanwhile, Kenneth Berke, CEO of PayQwick, supports the bill, claiming that bitcoins do not allow tracing of financial transactions.

Sen. Karen Keiser says that he is astonished by how such systems as PayQwick, which is like PayPal for marijuana business, allow weed companies to legally move cash into the federal reserve system.

At the same time, Joe Cutler, an attorney at the Perkins Coie, claims that the government's idea of the traceability of virtual currency is false. According to Jon Baugher and Ryan Hamlin, who created POSaBIT, a financial technology company that deals with bitcoin, their system requires credit card and driver's license data from the customers.

Moreover, every transaction made in bitcoins is available at the public blockchain. Though there is no particular identity, actual identification also happens outside the system. So it is very similar to the process of money exchange when the customer is known.

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