The Washington State Senate recently heard arguments about SB 5264, a bill to ban virtual currency use in the cannabis industry. Founders of Payqwick, which some refer to as the “Paypal of Pot”, spoke for banning Bitcoin. Founders of Bitcoin point-of-sale service Posabit, as well as a lawyer from Perkins Coie, spoke against a virtual currency ban for cannabis businesses. The state’s Liquor and Cannabis Board (LCB) spoke briefly after each party presented their case.
Also Read: A Cannabis Industry Icon Accepts Bitcoin
Bitcoin is Already Regulated
“We just follow the Department of Financial Institutions lead on this issue,” said James Paribello, legislative liaison for the LCB. “They have licensed businesses, [and] there are businesses licensed by us operating in this space and accepting and transacting through [bitcoin].”
When asked whether or not the LCB has concerns about how Posabit uses Bitcoin for cannabis payments, the LCB said it did not.
“We rely on the [Division of Financial Institutions] to make the call as to who can play in this space and since the DFI has said it’s okay, we’re okay,” said Mr. Paribello.
Senate members were clearly interested in learning more not just about Bitcoin, but virtual currency. “When I read about Bitcoin on the international space, it’s talked about with international drug transactions, the black economy, a way to get around currency controls, a way government can track things and anonymity,” shared Senator Michael Baumgartner. During the discussion, he heard reasons for and against his impressions.
Posabit vs. Payqwick
“It’s not that we don’t like Bitcoin in general,” Payqwick president Kenneth Berke told the Senators. “Bitcoin certainly has a use in other industries, but we think there is an issue with respect to Bitcoin in marijuana transactions, because of the lack of transparency,” Payqwick president Burke told senate members. “With bitcoin, there is no traceability.”
Perkins Coie lawyer Joseph Cutler, born and raised on a family farm in Spokane, spoke against a Bitcoin for pot ban. “Before we regulate currency [we] might want to understand how it works,” said Mr. Cutler. “What are the benefits? What does it do? It is a transparent, auditable transaction ledger. Every transaction done today is posted to that public ledger. This idea that it’s untraceable is simply false. People say Bitcoin is anonymous, that’s also false. We call Bitcoin pseudonymous, which is better than cash. In marijuana, cash is king, and there’s no traceability of customers for cash spent in marijuana stores. In virtual currency, that is not the case.”
Co-founders of Posabit, which is a registered money service business and money transmitter, outlined their Bitcoin-driven solution for the Washington State cannabis industry.
“Cash is dangerous,” said Posabit founder Ryan Hammond. “It’s dangerous to hold, dangerous to move, and you become a target of potential crimes.” Posabit requires identification, credit card number, other data, and sells the customers no more than $150 worth of bitcoin per day for marijuana purchases.
“If law enforcement has questions about a certain transaction, and if they paid in cash, there is no way to answer this question,” said Posabit Chief Compliance Officer, John Baugher. “But with the Posabit service they have ultimate traceability.”
Washington State Senate Wants to Learn More
The Perkins Coie lawyer suggested to Washington State senate a working session to discuss facts on Bitcoin. “Yeah, I think there is a lot we are curious about,” Mr. Baumgartner agreed.
The LCB reports less than 10% of state cannabis businesses now pay the state in cash, according to Director of Licensing and Regulation for the LCB, Becky Smith. Customers, however, are still largely paying cash for their pot in the state.
That fact that Bitcoin might minimize the amounts of cash being driven around Washington State in armored vehicles intrigued the Washington Senate members.
What do you think about the merging of cannabis and Bitcoin? Let us know in the comments below.
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