Can cryptocurrency and blockchain technology help the marijuana industry?

At first glance, 21st century companies with cryptocurrencies and legalized marijuana seem incompatible. A closer look, however, reveals a potentially more harmonious picture.

This is not only because pot companies, which currently have problems accessing even the most basic services provided by the traditional financial sector, could benefit from using assets such as Bitcoin (BTC -4.37%) and Ethereum (ETH -7.16%). It is also because blockchain technology has promised to streamline operations and accounting in an industry where such efforts can be complex.

Motley Fool contributor Eric Volkman recently had the opportunity to discuss the potential marriage between crypto and weeds with Mark Lozzi, founder and CEO of the industry’s next-generation financial services company. cannabis, Conifa. Here’s what he had to say.

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Eric Volkman: What are some of the best uses for crypto tokens and coins in the marijuana industry?

Mark Lozzi: The cannabis industry would be better served with a stack coin. The industry is already facing sufficient market volatility, so it is unnecessary to introduce additional risk and should be warned against.

I want to simplify use cases into two practical tracks; consumer payments and business-to-business transactions. Consumer payments are an easy way to introduce crypto to the industry. The advantage is to increase consumers’ purchasing power by unlocking new forms of accepted payments, but also to ensure that the industry stays up to date with societal interests and innovation.

I believe that Managed Crypto Payments will move to wider acceptance and use, where crypto via stablecoins will be held by cannabis companies as account balances and used for daily purchases.

Volkman: Similarly, how can blockchain technology be used to help marijuana growers / processors / retailers?

Lozzi: The idea is to provide a completely unchangeable and auditable banking infrastructure. Blockchain delivers the most compelling chain of custody application to the industry.

The biggest risks that the cannabis industry poses to the financial system are the source of funds and product tracking. Our goal is to bridge this gap and support the financial system by offering a platform that uses blockchain to connect product and money together.

Volkman: At some point, some form of SAFE Banking Act (which allows banks to service the cannabis industry) will become law. Once that is done, will this make all the aforementioned use cases for crypto / blockchain obsolete for the pot industry?

Lozzi: Let’s separate crypto and blockchain. I agree, SAFE Banking will come to life at some point, then decriminalization will follow. I believe that the reality around these legislative reforms will strengthen compliance and increase the need to manage cannabis programs across the financial system.

It goes without saying that the SAFE Banking Act will increase the number of financial institutions participating in the industry, but it will not remove the compliance and oversight necessary to support cannabis customers.

Blockchain and the chain of custody it entails will be even more valuable and beneficial to both industry and the financial system. Crypto will have its own path of adoption, where acceptance and use will be driven by access and convenience, in general. Crypto offers flexibility and payment speed, which in business are important aspects of successful operations.

Volkman: It is notoriously difficult for marijuana companies to make money. Do you think crypto / blockchain technology can be the “game changer” that pushes them towards mainstream profitability?

Lozzi: I do not think blockchain technology alone is the answer. Penalties and excise duties, as well as IRS Code Section 280E, should be reduced and eliminated, respectively. Unfortunately, these factors are not related to any blockchain technology and innovation.

Volkman: Technically, cannabis remains illegal at the federal level. What challenges does this pose for pot companies’ adoption of crypto / blockchain solutions?

Lozzi: Let’s look at these solutions separately.

Crypto carries a negative stigma associated with harmless activity. The federal issues ultimately call into question the compliance program and the quality of the infrastructure established to deal with the complexity of cannabis. Blockchain solutions can support compliance and reduce risk by giving the program immutability and audibility.

The use of crypto will have to live in a strong and compatible infrastructure so that the chain of custody regarding the cash flow can be supported according to regulatory requirements and guidelines.

Volkman: Cryptocurrencies have been going through hard times lately where many have lost a good deal of their value. Can they still be useful to companies even in their weakened state?

Lozzi: As I had mentioned above, I think over time the winner for this industry and all other industries will be stablecoins. A quick and easy way to shop and store value, while having the opportunity to knock 24/7.

Personally, I also believe in Bitcoin, but my advice to any business owner is to reduce as much risk as possible, and stack coins are designed to do that for you. The industry is already quite volatile, so it’s best to get rid of extra volatility where you can.

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