According to an anonymous source within the Washington state legislature, Senate Bill 5264, a bill to prohibit marijuana retailers from accepting bitcoin as payment for their products, has died in committee. While the bill remains in the state Senate Committee on Commerce, Labor & Sports, it appears that the bill’s prime sponsor, Republican state Senator Ann Rivers, has withdrawn her support of the bill. Senator Rivers change of heart on the bill came after the Committee on Commerce, Labor & Sports held a hearing on the bill on January 25th. Even the member of the Washington State Liquor and Cannabis Board, James Paribello, who testified at the hearing was not opposed to the use of bitcoin as a payment system for marijuana stores. “…Since the DFI [Department of Financial Institutions] has said it’s okay, we’re okay,” James Paribello of the state Liquor and Cannabis Board testified about the use of bitcoin at the committee’s public hearing on the bill.
One person who spoke against Senate Bill 5264 at the committee’s hearing was Jon Baugher, co-founder and COO of POSaBIT. POSaBIT is a Washington state based company that is enabling marijuana retailers to be able to accept bitcoin for payment at their stores. The company helps reduce the risk of having to possess and transfer large amounts of cash. Very few marijuana stores accept purchases with debit cards, due to federal laws and regulations which prohibit marijuana businesses from having full rights to access banking services. Some stores have found credit unions which are willing to allow credit card sales. A few other stores have what are essentially ATM machines attached to their cash register, so that the purchaser still has to withdraw their money before paying for their marijuana. Companies like POSaBIT help reduce the risk of robberies and burglaries from people seeking to steal a marijuana store’s large cash supply, which is often moved via armored cars.
While marijuana retailers in Washington state have been operating since 2014, the Seattle based startup, POSaBIT, has only been operating in marijuana stores in Washington state since 2016. The company sells bitcoin directly to the consumer, who does not have to use their bitcoin at the retailer, as the POSaBIT card is a bitcoin paper wallet. The company’s bitcoin kiosks are essentially a sort of bitcoin ATM, but instead of sending bitcoins to a wallet the customer has already created, customers are instead issued the bitcoin on a paper wallet card created by POSaBIT. Because customers are not forced to purchase marijuana after buying bitcoin from POSaBIT, the company is able to plausibly deny that their service is merely a scheme to allow marijuana businesses to launder money. Each use of a POSaBIT bitcoin card incurs a two dollar transaction fee, and provides the option for the customer to include a tip. Transactions are limited to $150, though POSaBIT plans to double the limit to $300 in the near future. POSaBIT accepts credit cards, debit cards, and bitcoin.
“We are selling bitcoin to customers, and allow our customers to accept bitcoin as payment … Obviously federal laws prohibit using credit cards to purchase cannabis. … That’s exactly what we’re not doing,” Ryan Hamlin, a former Microsoft executive and current CEO and co-founder of POSaBit, told the Seattle Weekly. POSaBIT’s bitcoin kiosks are located at marijuana retailers in Seattle such as at all Uncle Ike’s locations, Queen Anne Cannabis Company, Herb’s House, A Greener Today, as well as several marijuana retailers located elsewhere in the state. The company also has bitcoin kiosks at several stores which are not marijuana retailers. Another company has recently launched which is offering a similar service. First Bitcoin Capital offers a similar type of bitcoin ATM at cannabis stores in California and Oregon.
Cryptocurrencies like bitcoin allow the marijuana industry to route around the problems created by federal banking regulations and could have a huge impact on the industry. On October 21st in Denver, Colorado, the third annual Crypto Cannabis Conference will be held. The conference bills itself as the only conference that focuses on bitcoin and cannabis. The conference intends to host speakers who will be delivering talks aimed to educate and inform the attendees, rather than delivering sales pitches to attendees. While cryptocurrencies offer a banking solution in states that have legalized marijuana, states are also tightening regulations on cryptocurrencies. While the bill to ban bitcoin at marijuana retailers in Washington state is dead, the state is still tightening regulations by requiring companies like POSaBIT to obtain a money transmitter license.