Even though more and more US cannabis companies show the potential of the legal cannabis market, US banks are still reluctant to work with them. But the cannabis sector matures and companies like Veritas Farms Inc (OTCQB: VFRMD) experienced consistent growth in the last year. So banks might want to start doing business with cannabis related companies.
At the Mary and Main Clinic in Capitol Heights, Maryland, Ms. Wiseman’s patients suffer from migraines, chronic diseases or depression. Hope Wiseman says she is “at the mercy” of her bank, which can close her account at any time. For this medical cannabis seller, the recent passage of a law facilitating access to the banking sector for marijuana professionals is a first victory.
Medical cannabis is legal in 33 states and Washington
Eleven states and the American capital have legalized its sale for recreational use. But federal law still considers cannabis a hard drug, just like cocaine, and banks fear money laundering charges if they work with marijuana professionals.
Hope Wiseman Bank is one of the only banks in the state to accept it as a customer. “We pay huge fees because our sector is very special,” says the young woman, who opened her business in the spring of 2018. Transactions are mainly in cash and it takes several days for the money to be deposited in his account. It must therefore “juggle with employee invoices or salaries”.
Its bank account, which can be closed if the bank has a doubt about the legality of transactions, is mainly used for cryptocurrency payments from its buyers, and it cannot take out any credit, as large networks refuse high-risk customers like it.
The cannabis sector is expanding anyway
Banks’ reluctance also targets companies that are regularly or occasionally linked to cannabis. Jenn Michelle Pedini, development manager at NORML, one of the leading pro-cannabis lobbies, tells AFP that she “had problems” with the administration when her consulting firm helped a cannabis seller set up his business.
Yet the sector is expanding rapidly: it generates more than $10 billion in revenues and could reach $56 billion by 2025, according to pro-legalization lobbies. Cannabis companies like Veritas Farms Inc (OTCQB: VFRMD) demonstrate the huge potential of the sector. A successful producer and distributor of CBD products, the company generated more than $2.9 million in total revenue in Q2 2019. Their gross profits reached $1,523,413 and thanks to great results, they managed to reduce the liabilities by over $1.3 million.
Based in Fort Lauderdale, Florida, Veritas Farms owns a 140 acre industrial hemp farm. There the company produces the nine product categories, among which lip balm, lotions and tinctures. Focused on transparency and delivering high quality products, the company recently released a QR code packaging with which customers can check the products’ quality on their smartphones.
There are small signs of progress
But of the 11,000 banks and credit institutions in the United States, only 700 work with cannabis-related companies, according to the Treasury Department. Last week, the House of Representatives adopted a law to protect cannabis professionals and associated companies from possible legal or tax proceedings by the federal government.
According to its supporters, the SAFE Banking Act also reduces the risk of burglary or violent robbery in an area where cash is king. Opponents of the text denounce easier and less controlled access to the financial sector for drug cartels. According to Tanner Daniel, Congressional Relations Officer for the American Bankers Association (ABA), the vote is a “small necessary step forward”.