Pot Businesses Can't Use Banks: PotCoin To the Rescue?
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Despite the fact that it is regulated like alcohol in two U.S. states, and prescribed as a medicine in 20 (plus D.C.), marijuana remains a high-priority Schedule I illegal substance according to the federal government. The U.S. Justice Department released banking rules for marijuana businesses this year to ease concerns banks have about entering business with marijuana dealers, but so far the financial industry is slow to act. Even though they’re growing into a booming and extremely lucrative industry, most marijuana operations lack banking services. They're forced to operate on a cash-only basis, which puts them at a higher risk of robbery and theft. When your million dollar business can’t use a bank, it’s safe to assume you’ve got large stacks of cash hidden somewhere less secure.
Michael Elliot, executive director of the Marijuana Industry Group told NBC last month that “everyone in the industry is having nightmares.”
In an effort to stave off the nightmares, an entrepreneur calling himself "MrJones” came up with a new digital currency for the marijuana industry called PotCoin. MrJones and two others founded PotCoin and launched the business earlier this year. PotCoin would operate similar to Bitcoin, the online-only peer-to-peer payment system.
A March 26 article in Mother Jones explains how PotCoin operates:
“Someone interested in buying or selling marijuana starts by downloading an online ‘wallet.’ There are then three ways to fill that wallet with PotCoins: People can pay you with the currency, you can purchase it on an exchange using bitcoin or US dollars, or you can ‘mine’ new PotCoins (a complicated process that is described in more detail here). The current exchange rate for PotCoin, as of March 24, is about .00179 PotCoins per $1. The transaction fee for using PotCoins is negligible, and MrJones claims that PotCoin's transaction time is considerably faster than bitcoin's. (A bitcoin purchase can take up to an hour to process.) The goal, he says, is for PotCoin to be as easy to use as swiping a credit card.”
A few online retailers have started using PotCoin already, but time will tell whether the idea will catch on. As the Mother Jones article points out, Bitcoin has been used for years “to facilitate illegal drug transactions” and a new digital currency called DopeCoin is targeting the illegal drug trade. So, while PotCoin was conceived for use by state-legal pot businesses, there’s no way to regulate the online currency trade.
MrJones told Mother Jones: "We have no control on what people do with their coins. Nor are we accountable for their actions, good or bad,” adding, "We have no criminal DNA, nor do we have any criminal aspirations."