Proponents of the "Long Bitcoin, Short the Bankers" movement now can pinpoint another example where cryptocurrencies might be better than the traditional banking system.
A new bill has been introduced in California, where Assemblymember Phil Ting seeks to enable crypto payments for city and county taxes for the cannabis-related businesses. It is estimated that doing so would make the taxpaying process safer for local cannabis stores.
If the new bill becomes law, cities, and counties would choose whether they want to accept digital currencies from marijuana businesses, CBS Sacramento reported, adding that it could happen as soon as 2020.
The recreational use of cannabis is legal in many states, including California, Colorado, Washington, Alaska, Oregon, Massachusetts, Nevada, and Vermont. However, banks do not want to deal with local cannabis businesses. Most banks are secured by the Federal Deposit Insurance Corporation (FDIC), which prevents the provision of services for any activity which is illegal under the federal law.
Thus, most pot shops are unable to write checks and perform other basic financial operations. Consequentially, they are forced to deal with large sums of cash. In turn, it makes them easy targets for thieves.
Since cannabis business owners often arrive at the tax offices with suitcases of cash, the bill specifically aims to ease the process of tax paying. It proposes that cannabis-related companies could pay excise and cultivation taxes directly with stablecoins or by utilizing a third-party digital asset payment processors in effect from as soon as 2020.
The danger of moving cash also affects the safety of local neighborhoods, too.
“A small cannabis store just like a small storefront. They’re in a residential neighborhood. There are people who live there who are all around. If something happened that was potentially violent or dangerous, there could be repercussions for that neighborhood,” Ting told CBS Sacramento.
Crypto, cannabis, and taxes
Paying taxes with cryptocurrencies is not unorthodox since it has already been made possible in the state of Ohio since November 2018. The local tax offices accept crypto payments in bitcoin using third-party payment processor BitPay. However, there is a twist - even if a company pays their taxes in Bitcoin, the state will receive US dollars, as BitPay converts the cryptocurrency to fiat and transfers it to the state of Ohio. In either case, as of February 19, only two businesses have taken advantage of their right to pay their taxes in bitcoin, according to media reports.
Despite reports suggest that actual uptake of new opportunities to pay taxes in crypto has fallen below expectations, the status of crypto as a popular means of paying taxes, fees and fines may come closer to realization in the future, as reported by Cryptonews.com.
On another note, cryptocurrencies and marijuana industry have many things in common. Both of them are in the early stages of development, are often misrepresented in the press, and face legal and regulatory issues.
As such, numerous companies see the opportunity in bridging the gap between blockchain and cannabis industries, as blockchains ability to track and record everything “from seed to sale” could significantly enhance the legitimacy of cannabis businesses in the eyes of regulators.
