How do cannabis companies have bank accounts now when a safe banking law has not been passed?

Did you read the headline again? If you understand the struggles the cannabis industry has had with the banking sector for many years, you will be amazed by its information. All the news predicting a positive upward move for the marijuana sector is remarkable. We are about to find out how marijuana banking works without official legislation.

Banks are getting more marijuana customers.

More and more banks and lending firms are talking about their willingness to partner with marijuana entrepreneurs and businesses. According to recent reports, financial institutions were stable in the previous quarter.

For the last three quarters of 2020, states struggled with the revised reporting requirements they received from financial crime enforcement. The COVID-19 pandemic made things even more complicated, but something seemed to have been done in the last two quarters.

As of March 31, 6,894 lenders and banks had filed reports insisting they were already working with marijuana companies. That’s the same number of banks as it was last quarter, though it hasn’t hit its high of 747 in 2017. So why reducing the number?

Well, that slight reduction in 2020 was caused by the FinCEN. FinCEN is an institution that is part of the US Treasury Department and no longer includes the hemp-based companies in their three-month reports. This has been the situation since hemp was legalized under the 2018 Farm Bill. The bill contributed to the decline, unlike other increasing numbers of hemp bank accounts.

There appear to be a few custodians (these are called DIs) doing cannabis-related businesses, which after a decline that occurred towards the end of Jan.

According to FinCEN, the decline came along with the release of some new guidelines, according to its quarterly assessment. These new rules from FinCEN and other currency regulators focused solely on providing funding to customers involved in hemp deals.

Other influences on cannabis banking in America

Another issue to consider with this sudden drop in numbers is the coronavirus pandemic, which many experts believe will help ease government-imposed restrictions. These restrictions continued to affect SAR filings.

Interestingly, the leadership of FinCEN remained under the Obama administration in 2014. Back then, banks and credit institutions were required to submit their SARs in order to offer financial assistance to marijuana customers (businesses).

From this year on, the number of banks accepting cannabis customers has increased, and it has been until the recent downtrend. These up and down trends are particularly expected in a market like America, where there are tough banking regulations against cannabis companies.

Will banks work with marijuana customers now before the reforms are passed?

Despite these legislative setbacks, the number of financial institutions already working in the marijuana sector looks promising lately.

These statistics can change dramatically, mainly if Congress passes marijuana reform that protects institutions from penalties from federal regulators. In April, the House of Representatives upheld and approved the SAFE Banking Act (this was the fourth time), but its chances of survival are still in question at the Senate level.

There have also been some setbacks regarding marijuana banking legislation as some senators blocked the law. The chairman of the Senate Banking Committee has insisted that he take a “transparent” approach to the process and seek to move the legislation forward.

The future of banking legislation for cannabis-based businesses

It is too early to decipher the legislative effort, but no one thought we would have this discussion if there were no authorized laws. It means that there is hope for the future and cannabis business owners can start preparing for some changes.

One exciting aspect of this discourse is that the demand and supply curve within the cannabis industry will continue to grow as more states legalize marijuana. This realization also means that banks can no longer ignore this highly profitable industry.

As mentioned earlier, banks are already getting cannabis-based deals, even without sanctioned laws or federal guidelines. So imagine what will happen when the certified legislation goes into effect, banks will do more with cannabis-based companies.

America is at a turning point with its cannabis industry, and an attempt to consolidate that banking legislation will only make things better now and in the future. Additionally, this idea serves as a safeguard for cannabis companies that have relied on a flawed and risky cash system for many years.

Whatever decisions are made today will reflect the future of marijuana, and it is safe to say that we are on the right track today too. Banks and cannabis entrepreneurs will have a field day to benefit from each other and create a progressive echo chamber for the American marijuana society.

Bottom line

Currently, the Banking Act has about 39 co-sponsors in the US Senate, including its main sponsor. That number means that more than a third of the Senate Chamber officially signed it in support of the bill.

While this continues, the SAFE Banking Act will allow financial organizations to work closely with legalized marijuana companies without receiving federal penalties.

The thought of colliding with the law has prevented marijuana companies from operating exclusively with cash. However, running a “cash only” business makes them vulnerable to criminal problems and creates complications for regulators.

After the bill passed the House of Representatives, cannabis experts began looking for signs of progressive efforts by the Senate Banking Committee. The hearing of this committee on the draft law did not take place, although discussions did take place.

Some cannabis enthusiasts may worry about these steps forward and backward, wondering if they will bring anything positive in the banking space. Well, the fact that the House of Representatives, lawmakers and heads of state and government are pushing the bill is a sign that cannabis-based companies will soon be able to use banking structures regardless of any official law.

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