The SAFE Banking Act is designed to shield banks and credit unions that work with cannabis companies from legal penalties. Specifically, it would bar federal regulators from terminating a bank’s FDIC deposit insurance, a threat that has thus far prevented most banks from accepting cannabis business.
With the bill’s passage, it’s likely that more banks would open their doors to cannabis businesses. In turn, cannabis business owners would be able to open checking accounts and credit cards, and otherwise operate as normal businesses. Banks could even provide other services, such as payroll, creating a much-needed layer of accountability, transparency, and stability within the industry.
However, these changes wouldn’t happen overnight. Before accepting cannabis accounts, banks would need to meet certain compliance and reporting requirements, a process that could take several months.
If the SAFE Banking Act is passed, it would likely drive down the costs of cannabis financial services. Currently, the few credit unions that handle cannabis accounts charge significant premiums to compensate for the elevated risk and compliance costs these accounts represent. With increased competition from banks, premiums will inevitably decrease, reducing financial pressure on cannabis companies.
A second consideration is public safety. Today, most growers, dispensaries, and related companies are forced to do all their business in cash, putting them at risk on various levels. Giving businesses access to basic banking tools could reduce the costs of securing and transporting large amounts of cash.
Aside from the safety risk, the current cash-based system makes it more difficult for cannabis businesses to keep accurate, verifiable financial records. Establishing bank accounts will create more accountability, putting small businesses on the right track of recording and reporting their financial transactions.
One thing the SAFE Banking Act is unlikely to improve is access to loans. Cannabis companies still won’t have federal bankruptcy protection, and their product will remain a Schedule I narcotic. We’ll likely see a continuation of today’s environment, where private debt funds will lend against cannabis companies’ property (usually real estate and equipment) but not their inventory or other assets.
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