US Cannabis industry ripe for bitcoin

March 28, 2017 - Bitcoin
US Cannabis industry ripe for bitcoin


It’s hard to imagine a more unique industry than the US cannabis industry, or one that is growing and changing faster. Arcview Market Research reports a blistering 34% compound annual growth rate from 2014 to 2016, driven primarily by Colorado and Washington initiating adult-use sales. This rate of growth will subside somewhat in 2017 to 22%, as the eight states that voted to open or expand their cannabis markets on Election Day in November 2016 work to implement the new programs.

The research firm forecasts that growth will reaccelerate beginning in 2018, as adult-use sales ramp up in California and Massachusetts along with medical sales in Florida. That will grow the $6.7-billion market of 2016 at a robust 27% CAGR to $22.6 billion in 2021.

“That 20+% annual growth rate is likely to continue for many years past 2021 as more states and countries legalize cannabis.”

– Arcview Market Research

Polls show that 80% of Americans approve of legal access to medical cannabis and 60% approve of full adult-use legalization. That level of agreement is rare on any policy issue and it’s allowing elected officials across the political spectrum to start to move past the stigma previously associated with this issue.

But the effort to repeal cannabis prohibition at the Federal level remains complicated. There was a glimmer of hope in late 2015 when the Drug Enforcement Administration (DEA) announced it would reconsider its 45-year-long classification of cannabis as a Schedule 1 controlled substance.

In August 2016, the DEA reiterated its Schedule 1 classification, though it did loosen the rules to allow more researchers to study the potential medicinal value of cannabinoids. Even that move was apparently too much for some inside the bureau; in December new rules were announced clarifying that the agency even considers non-psychoactive cannabidiol (CBD) extracts Schedule 1 controlled substances.

“Schedule I drugs, substances, or chemicals are defined as drugs with no currently accepted medical use and a high potential for abuse.”

– US Drug Enforcement Agency

Beyond the threat of prosecution and asset forfeiture, the chief federal-level issue faced by cannabis businesses is lack of access to the banking system. North American consumers spent $6.7 billion on legal cannabis products in 2016, up 34% from $5.0 billion in 2015.

BDS Analytics’ retail tracking data allows a deeper dive into three of the most important markets: Colorado, Washington and Oregon. In 2016, cannabis sales averaged $1.98 million per retail location in Colorado’s adult-use market and $896,000 per location in the medical channel. In Washington state where medical dispensaries were shut down in favor of the adult-use market, the 357 remaining retailers averaged $1.55 million in sales per location. Oregon’s 350 retail outlets selling cannabis to adult shoppers generated $238 million in sales or nearly $672,000 per location, and Oregon’s 381 medical dispensaries experienced average sales per location of $294,000 over the same period.

While it is not actually illegal for banks to provide services to cannabis businesses, the regulatory burden for banks seeking to support cannabis businesses is so onerous and costly that the major players do not see a workable business model and so have shunned the cannabis industry.

In some states, this void in banking services is being filled by community banks and credit unions. Some of these smaller financial institutions, however, are unable to process the volume of cash deposits that larger cannabis businesses make on a regular basis.

In response, a variety of tech start-ups are developing ways to make it less burdensome for banks to embrace cannabis business clients. POSaBIT is using Bitcoin to help merchants charge customers, while also letting customers pay with credit and debit cards. “Federal laws prohibit using credit cards to purchase cannabis,” POSaBIT’s CEO and co-founder, Ryan Hamlin recently told the Seattle Weekly. “That’s exactly what we’re not doing.”

“POSaBIT gives consumers easy access to bitcoin by allowing them to purchase bitcoin during the retail experience. These wallets can be used to make purchases on the spot or anywhere that accepts bitcoin such as”


A large, Seattle-based tech startup studio, Pioneer Square Labs, helped hammer out POSaBIT’s offering, and find seed money for the new business. The studio works with and prepares projects for “13 of the world’s top venture firms and over 50 angels from the Pacific Northwest, Silicon Valley, and around the country.”

POSaBIT is a financial technology company that creates an easy way for consumers to acquire bitcoin at the point of sale. They can then use the digital currency to make purchases at that store through the POSaBIT system, or make purchases anywhere that accepts bitcoin as a form of payment.

The startup launched several stealthy pilot projects in Seattle during the summer of 2016, including all three Uncle Ike locations, A Greener Today, Herb’s House, and Queen Anne Cannabis Company. A uniform exchange rate fee is one of the lowest around. Instead of charging the typical 6-8 percent fee seen throughout the BTM industry, POSaBIT takes a flat $2 charge, with an upper limit of $150. Hamlin states that he plans to double the limit in the future.

From the onset, Hamlin knew that the hardest part of POSaBIT to create would be the legal framework. The former Microsoft Executive had a team from Perkins Coie review their business plan early on. “They’ve vetted everything,” the auditor told Seattle Weekly. POSaBIT has a “rich anti-money laundering policy.” After becoming licensed with Washington state as a money transmitter/currency exchanger, the entrepreneur found a banking partner and submits to internal audits twice yearly.