Easing of US marijuana laws propels crypto cannabis infrastructure

In a landmark vote on December the 6th, the US House of Representatives voted for the federal decriminalization of cannabis. The vote was primarily along party lines – with Democrats in favor and Republicans against – although five Republicans did vote in support of the Bill. The move comes as Americans tire of the country’s decades-long war on drugs which has done little to reduce consumption but has seen millions criminalized for generally benign cannabis offences.

The vote follows the states of Arizona, Montana, New Jersey, and South Dakota all voting to legalize marijuana for recreational use on election day this year. There is little chance the law will be passed in the Republican-held Senate though – which means cannabis will remain a Schedule 1 illegal drug at a national level. The result is a hodgepodge of differing city and state laws nationwide which complicates the operation of legal marijuana businesses. Securing payment solutions providers is particularly problematic in this regard, with legitimate cannabis merchants shunned by banks for services as simple as a checking account.

The deal between Tokes (TKS) owners Multichain Ventures and PotCoin (POT) will address some of these concerns by empowering PotCoin as a primary channel partner for the wider cannabis industry – supplying merchants with point-of-sale software, eCommerce storefronts, mobile applications, and supply chain visibility tools, all originally developed at Multichain Ventures.

With cryptocurrency as the payment methodology driving the sector, Multichain Ventures CEO Michael Wagner says his vision for the future will see ubiquitous deployment of Multchain’s existing financial services suite “to a global, industry-agnostic audience of early adopters interested in participating in the blockchain and cryptocurrency ecosystem.”

Additionally, Wagner expects the road ahead to include integrations with partners such as Brave New Coin, “that would extend the services offered into portfolio management, investment tools, yield generation, DeFi exposure, and direct trade operations.”

The Tokes payment system

The ecosystem of the Tokes Platform’s software products for payments encompasses a full loop from consumer acquisition of cryptocurrency (via on-site kiosk partner VaultLogic), to merchant processing at the point of sale, through to B2B transactions. Additionally, Tokes offers custody solutions enabling merchants to accept tokenized payments of numerous assets, trade these tokens for alternative digital assets, and subsequently initiate wire and ACH transfers through a custody agent to third parties.

What is PotCoin?

Established in 2014 by Canadian Joel Yaffe, PotCoin’s objective was similar to Tokes – namely to develop banking systems and infrastructure for the legitimate cannabis sector – built around blockchain tech and its native PotCoin cryptocurrency. The organization’s left-field approach to marketing has seen PotCoin feature prominently on late-night talk shows – most notably during President Trump’s meeting with Kim Jong Un in Singapore in 2018, when famed basketballer Dennis Rodman was sponsored by PotCoin to attend – and arrived in support of the North Korean leader wearing a PotCoin t-shirt.

Speaking to the relationship with Multichain Ventures, PotCoin’s @joshinthecity says the collaboration between the two organizations will see them leveraging the other’s core competencies for the future of decentralized blockchain technology. “With PotCoin’s community and the Tokes Platform technology we will provide the market with a complete transactional solution,” he says.

Background

Marijuana is used worldwide for medicinal, recreational, and spiritual purposes. As they do in the US, the regulatory guidelines surrounding cannabis vary wildly from country to country but the overall global trend is towards more legalization and legal cannabis-related businesses are becoming a growing part of the global economy.

According to Precedence Research, the global legal marijuana market size was valued at USD 17.5 billion in 2019 and is predicted to reach around USD 65.1 billion by 2027. While the U.S. currently accounts for 90% of the global market, growth in the rest of world is predicted to outpace the U.S., resulting in a market share of ~60% by 2021.

A 2017 Gallup poll also showed 64% of Americans supporting marijuana legalization, the highest ever. This was evidenced by the number of states and cities that continue to overturn local marijuana legislation – and the passing of the
Marijuana Opportunity Reinvestment and Expungement Act on December the 6th.

According to the UNODC, American residents over the age of 26 have been driving domestic growth.
State by state legality of marijuana in the US. Blue = legal, Green and Light Green = legal for medical use, Grey = illegal, D = decriminalized. Source: Wikipedia

Legitimate dispensary operations have significantly decreased drug-related crime along the U.S. and Mexico border, according to a 2017 study published in The Economic Journal. The newly legalized trade contributed an estimated US$655 million in tax during 2017.

It is not all high times for cannabis reform, however. For example, an Obama administration policy that had eased enforcement of Federal marijuana laws in states that legalized the drug was rescinded by the U.S. Justice Department in 2018 giving federal prosecutors wide latitude to pursue criminal charges – even in states where marijuana was legal under state law. Wagner says Multichain Ventures continues to engage with state law makers where it can – assisting with the regulatory language for the adoption of its technology within the cannabis vertical (most recently in relation to Nevada’s Assembly Bill 466 for marijuana transactions).

The collaboration between the Tokes Platform and PotCoin will be welcomed by cannabis merchants, who have often been forced to conduct their businesses entirely with cash. One cannabis business owner, Hezekiah Allen, shared his method of storing cash. “I buried everything. I had three different safes buried on a 200-acre parcel. Fifteen steps from the oak tree, a lot like a pirate. I had a little map. Pretty inconvenient and not the best cash management system.”

Combining their resources of technology development expertise, industry relationships, brand equity, and engagement with legislators, the collaboration between the Tokes Platform and PotCoin is likely to deliver significant competitive advantage within the burgeoning cannabis vertical.