As it becomes legal for recreational use in more places across the globe – such as many US states and in Blockhead’s second home, Canada – cannabis is disrupting multiple industries. Many regulators have not yet met the need for improved rules related to cannabis use. As such, this poses significant problems for distributors.
While it might seem like an unlikely pairing, blockchain technology might be the answer to the industry’s growth issues. It’s ideal for the cannabis supply chain due to its transparency, traceability and permanence, and also provides support to the unbanked businesses of the industry.
The cannabis supply chain: from grower to supplier
The cannabis supply chain is complex because, in the US, cannabis must be sourced from plants grown in the same state. This is largely due to the fact that the drug is not legal in every state. Because of this, it is tracked “seed to sale”. Yet, with limited technology, it’s difficult to verify where the plant was grown.
Regulators also track how much a person buys every day in places where cannabis is legal, due to restrictions on purchases. However, this is also difficult to enforce.
The solution? Well, you probably guessed it: blockchain.
This tracking is perfect for both auditors, lawmakers and investors. Investors want to know what they are investing in; auditors need to know that it is trustworthy; lawmakers require evidence at adherence to law. Blockchain technology can demonstrate exactly what network the cannabis has gone through to get to its end point.
This also allows law enforcement to identify when a person has purchased over the limit, or stop them before they do so.
Even governments themselves are investigating the technology.
Banking the unbanked industry
A large portion of cannabis businesses are unbanked.
This is because, while in many states in the US cannabis is legal, it is not legal on a federal level. Therefore, if banks deal in money from the industry, then they can be charged with money laundering. The industry is still very new, and this inevitably means that it is suffering through some regulatory issues.
The fact that a rising and profitable sector such as cannabis is still fundamentally unbanked seems largely unfathomable, yet it is an unfortunate reality.
Blockchain technology could – and is, in some cases, already – bank the unbanked of the cannabis industry. Cryptocurrency is not handled by banks, or intermediaries, therefore it is ideal for transferring value in the blockchain industry. It can allow for suppliers to escape the cash trade.