One of the biggest challenges for U.S. cannabis companies is the lack of access to banking services. Despite cannabis legalization at the state level, businesses in the industry still struggle to access financial services. All that may however be set to change with the reintroduction of the SAFE Banking Act 2021.
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The SAFE Banking Act was recently reintroduced to the U.S. Congress, to the delight of the entire cannabis industry. This post examines the Safe Banking Act 2021, the implications for the marijuana industry, and potential cannabis legalization.
Safe Banking Act for Cannabis reintroduced to Congress
The Secure and Fair Enforcement (SAFE) Banking Act is aimed at protecting financial institutions that serve marijuana businesses in states where weed is legal. This bill was reintroduced to Congress by Reps. Ed Perlmutter (D-CO), Steve Stivers (R-OH), Nydia Velázquez (D-NY), and Warren Davidson (R-OH).
Generally, this bill will allow financial institutions to do the following with individuals and businesses linked to the marijuana industry.
- Accept deposits.
- Extend credit to.
- Provide payment services.
Also, the Safe Banking Act will protect credit unions who are unaware of whether their members of customers are involved in marijuana-related businesses.
The key question however is whether the Safe Banking Act will eventually have its day in the Senate. More details should hopefully emerge in the coming days and weeks. Interestingly, and perhaps, fortunately, the American Bankers Association has issued a letter in support of the SAFE Banking Act 2021. The association addressed the letter to the congressmen who introduced the bill. In the letter, the association expressed confidence in the positives of the bill and how it would stop the marginalization of tangible economic activity in legal-weed states.
It’s worth pointing out that the SAFE Banking Act has previously been introduced in Congress but failed to pull through in the Senate. Will it go all the way and scale through this time around? We’ll be keeping a close eye on this.
How will this impact the marijuana industry?
The overall impact of the SAFE Banking Act will ultimately be far-reaching. First of all, it means that the local marijuana industry will no longer be marginalized. Cannabis businesses will no longer be limited from receiving financial services in states where weed is legalized. It would automatically mean that cannabis businesses can apply for overdrafts and loans from financial service providers. This would have a positive impact on both existing and new players in the local cannabis industry.
Currently, federal laws prohibit banks from doing business with cannabis companies since it is still federally illegal. Although some companies have found loopholes that enable them to strike deals with some banks, the industry is still cash-heavy. The SAFE Banking Act would effectively change this if it pulls through. Access to financial services would also make the marijuana industry more attractive to new investment even before federal marijuana legalization comes into play. For instance, Florida which has a thriving medical marijuana market would benefit greatly from this bill.
What does the safe banking act mean for cannabis legalization?
Simply put, the SAFE Banking Act could have a tremendous effect on cannabis legalization at the federal level. It can act as a springboard for lawmakers to speed up bills aimed at legalizing marijuana nationwide. If marijuana companies had access to financial services, it would somewhat normalize their operations in the weed legal states.
When marijuana companies start accessing financial services nationwide, it would lead to more success and exposure. This could consequently result in more pressure for the federal government to expedite cannabis legalization and reforms.
Closing marijuana legalization thoughts
If the SAFE Banking Act 2021 is passed into law, it will fix the anomaly that prevents U.S. cannabis companies from accessing financial services. However, the job doesn’t end there. Until cannabis is fully legalized at the federal level, the full potential of the industry may never be actualized. Notwithstanding, the SAFE Banking Act will serve as a giant stepping stone to that effect. Before then, the bill will need to cross several committees and votes.
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