Blockchain startups hope to solve cannabis industry's banking woes

With the U.S. cannabis industry now estimated at over $7 billion, the conflict between federal prohibition and the laws of each States that allow medical or recreational cannabis make it virtually impossible for most cannabusinesses have bank accounts or accept credit cards. Federal banks refuse to work with customers who make their agent on a federally illegal business.

But today, a number of start-ups are using blockchain technology to facilitate financial transactions in the cannabis industry. With new virtual currencies, they hope to attract 75% of cannabis businesses that today only operate in cash and without bank accounts.

«Ultimately, it's impossible to agree on the amount of these transactions because they are mostly done in cash,» explains Lamine Zarrad, founder of Tokken, a Colorado-based company that provides banking services to cannabis businesses using indelible Blockchain ledgers that ensure data integrity.

To use Tokken, customers of cannabis dispensaries must download an application and connect it to their bank account. They then pay using a mobile wallet. The transaction is recorded on Tokken's books, and the merchant sees a number of credits appear that only work with the app. Merchants can then pay their suppliers with Tokken or convert them into dollars.

Blockchain is a series of algorithms that records data and facilitates transactions, while ensuring that transactions are compliant, both in terms of personal identity and payment guarantee. «It's the most cryptographically and mathematically secure system today,» says Zarrad.

What's more, since the blockchain records all transaction history, law enforcement agencies or the justice system can investigate a dispensary and use Tokken to trace its activities. The app makes transactions less discreet than in cash, but data is encrypted.

New cannabis policies could adopt this technology and incorporate it into seed-to-sale software to keep a complete inventory of the plants grown, the growing cycles, the different batches of cannabis, etc...