Blockchain Buds: Tracking Cannabis From Seed To Sale
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Cryptocurrency and cannabis are two of the most exciting emerging industries in modern times. Both are constant topics of discussion in media and politics on national, state, and local levels. We covered several aspects of the cannabis industry and crypto’s green rush, but most of it is honestly little more than kitsch value.
Hempcoin is one of the only viable cannabis crypto projects that passed across our radar so far. Many, like Alt Thirty Six, are focused on crypto payments in cannabis. Because it’s a mostly cash-only industry (many dispensaries and delivery services around the country have figured out ways to accept card payments), cannabis seems ripe for disruption from cryptocurrency.
The blockchain is where the true value lies in cannabis, though. Supply chains are desperate for blockchain technology, and it’s no more apparent than in the legal medical and recreational cannabis industry. Seed-to-sale tracking is mandatory, and each state has different requirements and a different system of record.
Crypto payments are as uninteresting to pot dispensaries as they are to gas stations, grocery stores, and realtors for the most part. But the cannabis supply chain can easily be disrupted by the right blockchain if they play their cards right.
Here’s how.
Why Crypto Isn’t High on Pot’s Mind
The selling point for a crypto coin like Potcoin is that cannabis-based businesses can’t use banking services. This is somewhat true: FDIC-insured institutions can’t do business with cannabusinesses until it’s federal, rescheduled and decriminalized.
Still, the Department of the Treasury left things open-ended for banks to open accounts, and cannabis-based businesses have long found ways to deal with cash overflow problems. Financing and payments simply aren’t appealing to retailers at the moment – cannabis retailers are no different.
These businesses are highly scrutinized by federal, state, and local authorities and regulators, and the last thing they need to do is gamble with their money. Besides, only well-funded projects are able to start up these days.
In California’s recently legalized recreational market, it costs around $500,000 just for licensing fees and startup costs. These become annual fees, and that’s not even including taxes and typical overhead and business expenses. It’s a massive hurdle that serves as a financial gatekeeper to all but firms with liquidity to gamble.
And it is a gamble – California raked in over $2.75 billion in cannabis sales to date, but businesses risk being shut down or raided after Jeff Sessions ordered the Department of Justice to ignore Obama-era guidelines – which had essentially ceased Federal harassment of the marijuana industry, except in cases of interstate commerce, organized crime, and sale to minors.
Doing business with the crypto industry, which is heavily scrutinized by regulators itself, seems like adding fuel to the fire. High Times even canceled an effort to use Bitcoin in its IPO: one can only speculate on how new voicers like Marijuana Business Daily, Dope, and Cannabis Now will view the High Times decision to avoid the crypto route.
The Cannabis Supply Blockchain Saves the Day
The real pain point that blockchain can resolve for the cannabis industry is in the seed-to-sale tracking. What’s currently happening in each state that legalizes medical and recreational cannabis is one inventory tracking system becomes the state’s official system of record. In many states like California, Nevada, Alaska, Oregon, and Colorado, MetRC by Franwell the preferred SoR.
California faces massive delays until at least November in its full tracking system because implementing MetRC is harder than it sounds. Every single product must be tagged as seeds, plants, harvested, extracted, etc. Even the patient is tracked.
If you’ve never seen a legal cannabis label, here’s one from Arizona’s medical marijuana program. It’s for a Thai stick.
Everything is scanned and traced so the state can see the full journey of every product from being planted to bought by the end-user. In DIY states like Oregon, seeing the full farm-to-table life cycle of every ingredient in everything is coveted. If you don’t do it right, they’ll just grow and make their own.
In Nevada, testing is among the best in the country. This means every batch from every grower, producer, and dispensary has to be tested for heavy metals, pesticides, mold, and other contaminates, along with potency levels. Labeling and testing requirements get strict, and transferring data from the dispensary’s in-house point-of-sale system to the state’s SoR has a lot of moving parts.
This is where the blockchain could easily fix the cannabis industry. By attaching the codes and labels already being traced, the information is easier to store, archive, and search. Compliance and data transfers between licensed businesses and government agencies would be greatly improved.
But, as with everything government, there’s a caveat.
The One Problem in the Way of Marijuana Blockchain Adoption
Aside from the fact that nobody except Hempcoin is really focused on using the blockchain for the cannabis supply chain, the other problem is each state has contracts in place with a particular service provider.
To accomplish this feat of helping the cannabis industry, you would need to have a finger on the pulse of when federal legislators are willing to decriminalize it. At this point, you could pitch the blockchain on the federal level against all the companies like Franwell making legacy-based systems.
Instead of publicity stunts like sending Dennis Rodman to North Korea or throwing a tacky pot leaf on a crypto, that’s where the real money is to be made in the cannabis industry.
Every cannabis entrepreneur is up to their ears in pitches from businesses trying to take a piece of their pie. You won’t win them over unless you can legitimately resolve their problems…even if you have to go over their heads to do it.
The author is not currently invested in any cryptocurrency mentioned here. He has, however, contributed to High Times magazine and does carry a medical marijuana card in the state of Arizona.
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