Washington state bill would ban bitcoin for marijuana sales
On Wednesday, a state Senate committee held a hearing on Senate Bill 5264, legislation that targets virtual currency's role in marijuana transactions. Washington legalized recreational marijuana in 2012, and virtual currency has become a reliable transaction option for many of the state's cannabis businesses.
"A marijuana producer, marijuana processor, or retail outlet must not pay with or accept virtual currency for the purchase or sale of marijuana or any marijuana product," the bill reads.
The final page of the legislation defines "virtual currency" as "a digital representation of value used as a medium of exchange, a unit of account, or a store of value, but does not have legal tender status as recognized by the United States government."
Senator Ann Rivers, the bill's Republican sponsor, said the legislation's intent is to ensure Washington's cannabis industry does not run afoul of federal rules.
"There's no tracking of cryptocurrency," Rivers said, according to GeekWire, echoing hearing testimony offered by PayQwick CEO Kenneth Berke, whose company helps businesses in the cannabis industry move money into savings accounts.
"Bitcoins — there's no traceability to it," Berke said Wednesday.
The federal government's posture on marijuana ‒ it does not recognize the legality of marijuana anywhere in the country ‒ demands that state-based pot businesses be heavily regulated. Given the federal prohibition on marijuana, most banks avoid handling marijuana money. Thus, the industry does not allow credit cards or checks for transactions, but cash only, leading supporters of virtual currency to suggest bitcoin and the like could fill the void.
Opponents of the bill said the largely un-banked industry currently operates in a dangerous environment. Disallowing virtual currency would only further expose pot businesses to crimes such as burglary, they argue.
"Cash is dangerous. It’s dangerous to hold. It’s dangerous to move," said Joe Cutler, an attorney who represents co-founders of POSaBIT, a financial tech company that facilitates bitcoin transactions.
"The idea that it is untraceable is simply false," Cutler added during Wednesday's hearing on the bill, according to GeekWire.
Rivers previously claimed that the bill is an attempt to "move [the cannabis industry] out of the shadows."
"One of the goals of my Cannabis Patient Protection Act, which became law in 2015, was to eliminate the black and gray markets for cannabis in our state," she told CoinDesk this month. "SB 5264 addresses another part of the regulatory challenge. After all the work we’ve done to get a handle on the cannabis industry and help move it out of the shadows, allowing the use of unregulated currency for cannabis purchases doesn’t promote the level of transparency we committed to develop."
But POSaBIT founder Ryan Hamlin said his business, which demands credit card information and a driver's license from its customers, allows more safety than the current cash-only model.
"We have more transparency in our system than any cash transaction," he said.
The bill's passage would likely trigger legal action, said Rob Fess, marketing director for Tradiv, a wholesale cannabis sales distribution platform.
"It seems like quite a stretch to single out a specific industry to be excluded from using a particular type of payment – I imagine the lawyers will have a field day with that," he told CoinDesk.
A committee vote on advancement of the bill has not been scheduled.