William Sumner
Will the world of banking ever catch up with the marijuana industry? That was one of the many questions asked and answered at the Green Market Summit, which took place on September 14, 2018. The culmination of these experts has led to the publication of The Economics of Cannabis Banking by the Green Market Report.
Starting off the summit was a discussion panel on the state of banking in the marijuana industry, moderated by Tahira Rehmatullah, Chief Financial Officer of MTech Acquisition Corp. The panel featured a distinguished collection of marijuana and financial experts, including Matt Karnes, Founder and Managing Partner of GreenWave Advisors, LLC; Tyler Beuerlein, Executive Vice President of Business Development at Hypur Inc.; and Andre Herrera Vice President of Banking & Compliance at Hypur Inc.
The discussion began with Herrera laying out how marijuana businesses are defined under the FinCen document BSA Expectations Regarding Marijuana-Related Businesses, explaining that there are three different tiers. The first tier involves operators that directly touch the cannabis plant, such as cultivators. The second tier is understood as businesses that provide ancillary services to the industry. The third tier provides professional services to the industry, such as real estate agents or software providers.
Quickly the panel turned its focus towards the landscape that many marijuana-related businesses face, and why many financial institutions are hesitant to work with the industry.
“This is a highly regulated, cash-intensive industry,” explained Beuerlein. “Not only is the financial institution’s charter on the line, but also the officers of a financial institution have personal liability when banking these industries.”
Beuerlein went on to emphasize the importance of transparency when it comes to marijuana-related businesses banking with financial institutions and how his company, Hypur Inc., helps increase that transparency through its technology platform.
The conversation then started to turn towards the future of marijuana-related banking and the future of companies like Hypur that help facilitate relationships between financial institutions and the marijuana industry. Karnes was positive about the future, stating that marijuana would be treated like any other business once prohibition is over; although he did note that there would still be a need for companies like Hypur, albeit to a lesser extent.
When asked about the idea of creating a financial institution solely for the purpose of banking with the marijuana industry, however, Karnes was less than optimistic.
“I don’t think it’s practical,” Karnes said. “If a new bank were to open up, by the time the costs were incurred, and everything was up and running, prohibition will probably be over. So, what’s the point?”
Bookending the discussion, Herrera presented a positive outlook for the future of marijuana-related banking regardless of whether prohibition is quickly ending, noting that conditions are drastically different from where they were several years ago.
“I see attitudes changing. About three years ago I was at a bank association conference and anytime I would mention marijuana it would be like crickets. You couldn’t get anyone to talk about it,” said Herrera. “About a year later, they asked me to speak at their event.”
Stay tuned to find out more about happened at the Green Market Summit, as the Green Market Report gives you an in-depth look at the event throughout the week. For a general recap of the event, please click here.
One comment
Sean Santa
September 23, 2018 at 9:00 pm
Great article William. I thought this portion of the event was really interesting and you did a good job presenting it.