by Michael Maharrey, Activist Post:
A bill filed in the Oregon House would establish limited state-chartered banks to serve the cannabis industry. Final passage of this legislation would remove a major federal roadblock in front of the developing industry in the state and further nullify federal prohibition in practice.
Rep. Pam Marsh (D) and Rep. Ken Helm (D) introduced House Bill 3169 (HB3169) on Feb. 28. The legislation would create a self-contained, state chartered banking system for the cannabis industry in Oregon.
Because marijuana remains illegal under federal law, cannabis businesses in states that have legalized marijuana remain effectively locked out of the banking system. If a federally chartered or insured financial institution touches marijuana money, it takes on significant legal risk. The federal government insures or charters virtually every bank in the U.S. As a result, cannabis businesses have been forced to transact almost exclusively in cash. Passage of HB3169 would bypass the federal banking system and create a limited banking alternative for the marijuana industry in Oregon.
HB3619 would authorize banking institutions and credit unions to organize as limited charter cannabis financial institutions. Cannabis businesses would be able to deposit funds in these institutions and write “special purpose checks” for the following:
(a) To pay fees or taxes to a public body;
(b) To pay rent on property that is leased by, or on behalf of, a cannabis business;
(c) To pay a vendor that is physically located in Oregon for goods or services associated with a cannabis business; and
(d) To purchase bonds issued by a public body.
These checks could only be deposited or cashed at the issuing cannabis limited charter bank or credit union, or another cannabis limited charter bank or credit union that agrees to accept the check. This would keep the entire process outside of the federal checking system known as the automatic clearing house (ACH).
FEDERAL BANKING LAWS
The Federal government has used banking laws as a weapon in its unconstitutional war on cannabis by making it impossible for marijuana businesses to access the banking system – even in states where marijuana has been legalized. The feds can prosecute bankers for knowingly engaging with cannabis businesses under the Bank Secrecy Act, the USA Patriot Act, and the Racketeer Influenced and Corrupt Organizations (RICO) Act.
For instance, in 2015, the Federal Reserve Bank of Kansas City denied Fourth Corner Credit Union’s application for a master account. The Denver based credit union was formed by Colorado’s state-licensed cannabis manufacturers as a non-profit cooperative. By denying its application, the Fed prevented the institution from access to the Fed’s payment facilities, including its check clearing, wire transfer, and ACH facilities. This made it virtually impossible for Fourth Corner to do business.
In February 2018, the Federal Reserve Bank of Kansas City finally gave conditional approval for Fourth Corner’s master account. But according to the Marijuana Business Daily, the credit union will not serve plant-touching business. It will cater to “advocacy groups, charities and ancillary companies such as accountants.”
State-chartered banks do not have to be members of the Federal Reserve system. But as it did with Fourth Corners, the Fed can deny any non-member bank or credit union access to its services. In other words, the Federal Reserve can lock any bank attempting to operate in the cannabis industry out of the broader banking system, making it impossible for them to do business with any other bank or merchant. With the passage of HB3169, Oregon could bypass the entire federal banking system and its regulations, and create a self-contained banking network for the marijuana industry.
THE CRYPTO ALTERNATIVE
Some marijuana businesses have circumvented the banking system by transacting in bitcoin or other cryptocurrencies. Technology companies like SinglePoint and POSaBIT have been working to generate a payment method for medical marijuana dispensaries and consumers using bitcoin.
In 2014, SinglePoint placed terminals in some medical marijuana dispensaries that allowed patients to make payments with their debit cards, but the banking system quickly shut it down.