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The recent surge in the cannabis industry has brought many eyes to witness its potential to grow the American economy. Every day, hundreds and thousands of people walk into cannabis dispensaries in legal states to purchase cannabis. These purchases have contributed to a large growth in the cannabis economy. Many financial institutions seek to be a part of the cannabis banking movement.
According to quarterly data presented by the US Treasury Department, over 800 banks and credit unions have filed paperwork with the United States government to state their relations with cannabis businesses.
This marks a significant increase from last year. In the past year, 553 banks and 202 credit unions provided their services to cannabis-related businesses. These numbers constitute 11 percent of banks in the US and 4 percent of credit unions in America.
The Evolution of Cannabis Banking
For many years, the cannabis industry has faced many hurdles in its development because of its classification as a Schedule 1 drug. Although cannabis has been made legal in over 30 states in America, it is still illegal on the federal level. This hurdle has historically prevented the big traditional banks in the country from investing in the industry. Cannabis dispensaries and other cannabis-related businesses pay more taxes. They also cannot get access to loans or accept payments through credit cards.
However, change is coming. More states in the US have legalized the use of cannabis for medical and recreational purposes. Financial institutions in the country are reevaluating their stance in the industry. On September 27, the Senate sat to preside over the Secure and Fair Enforcement Regulation (SAFER) Banking Act.
The SAFER Banking Act serves the purpose of creating protection for depository institutions that provide financial services to cannabis-related legitimate businesses and service providers for such businesses, among other purposes.
The Senate has not fully revealed the outcome of their sitting for the SAFE Banking Act. However, many believe that the legislation has good momentum. With the successful passage of the bill, there are many key benefits to the cannabis industry.
Why You Should Get Your Medical Marijuana Card
Veriheal has satisfied millions of patients nationwide by giving them access to these benefits
- Larger purchase limits
- Peace of mind
- Enhanced legal protection
- Access to higher potency strains
- Save up to 25% on cannabis purchases
- Skip the line at the dispensary
The founder of Cureleaf, Boris Jordan, said, “There obviously will be a boost to our industry because, usually, when credit cards are allowed, it brings about a 25% boost to almost any industry.”
“Right now, it is impossible for US institutions to own stock in the largest US operators in cannabis, and passing legislation like this should lead to that possibility,” said Ben Kovler, Founder of Green Thumb Industry.
FinCEN Reports on Cannabis Banking
The Financial Crimes Enforcement Network (FinCEN) has been tracking banking trends in the cannabis industry for most of a decade. FinCEN started reporting on cannabis trends in 2014. Since then, we have seen a record-high in the interest of financial institutions in helping state-legal marijuana businesses.
FinCEN’s last quarterly update reported that, in the second quarter of 2023, 812 banks and credit unions were involved with cannabis-related businesses. This number surpasses the 807 financial institutions in the previous quarter and the 773 financial institutions in the quarter before that.
These financial institutions have been showing interest in the cannabis industry for many reasons. The recent adoption of adult-use marijuana programs in the states of Connecticut and New York is a prominent contributor to this interest.
Another important reason why financial institutions are starting to feel comfortable helping the cannabis industry, despite its illegality at the federal level, is the proposed adoption of the SAFE Banking Act.
Sen. Jack Reed, when speaking about the SAFER Banking Act, said, “I think we’ve resolved most of the issues we had with the proposed act. I hope we have so we can get it out of the committee with a strong vote.”
The cannabis industry is on a path of evolution. There is a remarkable transformation happening in the industry, which is made available to everyone through FinCEN’s reports.
Today, financial institutions are increasingly becoming interested in the cannabis industry, and this helps the industry by providing more security and transparency to its processes. As the industry matures and the regulations evolve, this relationship is set to advance to the highest level in the United States of America.