RSS Marijuana Investing News
  • Iowa, Missouri And Michigan Examine Marijuana Policy Updates April 24, 2018
    Iowa Senate bill would allow more potent medical marijuana DES MOINES, Iowa (AP) — Iowa lawmakers may vote on a bill on medical cannabis in the coming days, although it’s unclear if there’s enough time before the session ends. A state Senate committee voted 11-3 on Monday, April 23, 2018, to advance a bill to […]
    Associated Press
  • Monterey Bud: Prohibitionist is Pro-Marijuana in Congressional Race April 24, 2018
    Donna Shalala, a former U.S. Health and Human Services secretary and current Democratic candidate for a Florida US House District, has a message for her would-be constituents: Rescheduling marijuana is now a priority for her. On Friday, Shalala announced via Twitter that she believes marijuana should be removed from the Controlled Substance Act. Minorities and […]
    Monterey Bud
  • Examining the Cannabis Lexicon April 24, 2018
    A linguist helps explain the identity behind weed words. “Okay, it was for me. I was going to smoke the marijuana like a cigarette.” The quote above is from the television series Arrested Development, a critically acclaimed, but short-lived comedy from the early 2000s. The episode is “Pier Pressure,” where George-Michael, played by a not-yet-famous-but-already-extremely-gifted […]
    Nic Juarez
  • NORML Delivers More Than 10,000 Comments to FDA in Favor of Descheduling April 24, 2018
    After the Food and Drug Administration (FDA) requested public comments on whether to change marijuana’s classification as a drug with no medical use and a high potential for abuse, a leading US cannabis advocacy group turned in more than 10,000 responses for a survey that could shift drug laws all over the world. In early […]
    Duke London
  • Weekly Legislative Schedule: Marijuana Bills In CA, CO, DE, and IA Get Hearings April 23, 2018
    California Weighs Nearly a Dozen Marijuana-related Laws; Colorado May Allow Pot ‘Tasting Rooms’; Iowa May Exempt CBD from Sales Tax Cannabis legislation in California, Colorado, Delaware and Iowa will receive hearings during the week of Monday, April 23, 2018. California’s elected officials debate the pros and cons of greater racial and gender business equity in […]
    Monterey Bud
  • 19 Prospective Marijuana Businesses Vie For 2 Licenses in North Dakota April 23, 2018
    BISMARCK, N.D. (AP) — North Dakota’s Health Department will review 19 applications from potential manufacturers of medical cannabis. Medical Marijuana Division Director Jason Wahl says that’s the number of applications that were submitted prior to the deadline Monday, April 23, 2018. A seven-member panel made up of health officials, citizens, law enforcement officials and a […]
    Associated Press
  • It’s 4:20 p.m. Do You Know Where Your Marijuana Smokers Were? Celebrating The High Holiday April 23, 2018
    SAN FRANCISCO (AP) — Thousands of marijuana enthusiasts simultaneously exhaled a giant cloud of smoke that rose above San Francisco’s Golden Gate Park precisely at 4:20 p.m. Friday, the annual April 20 high holiday. An estimated 20,000 people flocked to the park’s so-called Hippie Hill for the annual 420 celebration of all things pot and […]
    Associated Press
  • Massachusetts Senator: Feds Should ‘Get Out of The Business’ of Banning Marijuana April 23, 2018
    BOSTON (AP) — Massachusetts Democratic US Sen. Elizabeth Warren says cannabis shouldn’t be banned by Washington. In a Friday tweet, Warren said: “The federal government needs to get out of the business of outlawing marijuana. States should make their own decisions about enforcing marijuana laws.” The federal government needs to get out of the business […]
    Associated Press
  • This Weed in News, April 21: Grass is Becoming Greener for Legalization During 420 Week April 21, 2018
    Cannabis news dominating the headlines over the past seven days indicates the reform movement made significant progress during 420 week, covering April 14-21, 2018. A New York Senator files legislation to end federal cannabis prohibition; a Food and Drug Administration (FDA) advisory panel supports CBD as a treatment for epilepsy, and one potential presidential candidate […]
    Monterey Bud
  • North Dakota Receives 17 Applications to Grow Marijuana; former NAACP Head Calls For Full Legalization in Maryland April 21, 2018
    17 apply so far to be medical pot growers in North Dakota BISMARCK, N.D. (AP) — North Dakota’s Health Department has received 17 applications so far from potential manufacturers of medical cannabis. Medical Marijuana Division Director Jason Wahl says the deadline was Thursday, April 19, 2018, but it has been extended until April 23, 2018, […]
    Associated Press
Aaron Biros March 7, 2018

Disclaimer: Marguerite Arnold has just raised the first funds for her blockchain-based company, MedPayRx in Germany (and via traditional investment funding, not an ICO). She will also be speaking about the impact of blockchain on the cannabis industry in Berlin in April at the International Cannabis Business Conference.


You have probably heard of cryptocurrencies, tokens and smart contracts. You might have also heard, even if you did not understand the significance, that IBM recently suggested that the Canadian government use their form of blockchain, called Hyperledger, to track the recreational cannabusiness. Or that a large LP called Aurora is also looking at this space (as are other licensed producers large and small). Or maybe you have seen an item in the mainstream news about an ICO for a cannabis company that is now also going terribly wrong. Despite all that, one of the more recognizable women in the cannabis industry in the U.S., Jane West, just launched a lifestyle, shopping ICO.

What on earth is going on?

These are all related issues, even if highly confusing and disjointed. Blockchain technology and cryptocurrency are hot right now and getting hotter – both in the mainstream world and in the cannabis industry globally. But for all its fans, the drumbeat for caution is also growing louder the more mainstream this technology (and the legitimate cannabis industry) becomes.

The many problems the entire cannabis vertical has with banking has make this current development almost inevitableOn the technology and finance side, that is why so many big names right now are urging caution. Nouriel Roubini, professor at NYU’s Stern School of Business, is just the latest to do so – and for reasons that everything to do with history. Including recent history ten years ago, when the world stood on the brink of a financial disaster thanks to unchained derivatives. The biggest worry in fact, right now, is about the financial implications of widespread adoption of the technology, beyond the tech itself and how it may (and may not) be legitimately used. Which itself is a huge question.

So why all the fuss?

This is revolutionary technology which is also being introduced into the market at a time when decentralized processing for automation is on the horizon. But also because blockchain can be used to create tokens or digital coins that act like financial instruments. And once created, such tokens can be issued much like money or even stock, to raise additional funds – for both start-ups and ongoing enterprises. The best thing though? This technology was invented to create a decentralized form of value exchange and trust-less, anonymized auditing and verification. No traditional financial institutions or even governments needed, wanted or should apply (at least in theory).

The many problems the entire cannabis vertical has with banking has make this current development almost inevitable. Not to mention accessing investment cash (although this is certainly changing outside the United States). Compliance issues in every direction are another wrinkle this tech will help solve. Starting with tracking product but also rapidly expanding to uses including protecting users’ privacy and facilitating access to high-quality, inspected product for qualified users and buyers. Not to mention other areas that are literally space-age but coming fast. Look for cool stuff coming soon involving both AI (artificial intelligence) and IoT (internet of things).

It is a fascinating, complex space. However, one aspect of this world, in particular, Initial Coin Offerings – or ICOs are getting attention right now. Why? They can be an incredibly efficient way to raise money for companies – both ones currently in business and start-ups with little more than a whitepaper or business plan and perhaps a working prototype. More and more of the successful ICOs are, however, for an existing company or are even attached to an asset, including a license, a prototype or a fund of money (or other combinations). They also rely on blockchain and alternative currency or tokens (sometimes also referred to as smart contracts) to work.

From a technology perspective, you can “mint” new coins relatively easily these days, sourced from a variety of different kinds of blockchain. Or even combinations thereof. You also can issue tokens or altcoins without an ICO.

In a world where there is vastly expanding cannabis opportunity, and many of these hopeful entrepreneurs are both digitally astute but without access to traditional capital, what could be better?

bitcoin
Bitcoin quickly became one of the more popular cryptocurrencies

From a financial and investor perspective, ICOs are a hybrid form of an IPO meets social media. “Coins,” “tokens” and “smart contracts” –or cyber currency collectively– are digital forms of cash, contracts, membership cards, discounts or even authorizations for identity. There are many ways tokens can be used, in other words. This by way of saying there are also important differences too. Not all tokens are the same. Not all are used as “money.” Some are but have assets assigned to them (like real estate). Others, particularly smart contract tokens, are strictly functional (pay funds when product is delivered and verified). The one caveat here is that the exchange of any token or altcoin will also cost money. Why? It is the electricity cost of computer processing the request for transfer. Plus access and service fees. There is no such thing as a “free” token. How tokens are priced, sold, bought, maintain value and for what purposes, is a debate if not process function that will not be solved anytime soon. Starting with the fact that some blockchains are more energy efficient (and sourced from green energy) than others.

To add to all of this confusion, not all ICOs function the same way. Some do give investors ownership in the company or specific portfolios that even include real-world assets. Others offer to use pooled funds to buy assets (like real estate or an expensive license). Many rely on the “coin” issued as a kind of discount scheme, reward mechanism and in many cases, direct discounted payment for future goods and services, of both the digital and real world kind. Many offer banking services directly, including in the very near future, the ability to exchange cyber cash for the fiat variety at even remote ATMs. Sound futuristic? It is coming and soon.

Most ICOs in the market now, however, rely on the following supposition: Issue a token with a unique name. Put up an ICO website. Encourage investors from anyplace on the planet with an internet connection, to use either crypto or fiat currency to buy tokens in the issuing startup as an investment that will give the new company funds to operate and build out services or the application (whatever that is). Also, plan to use the tokens for an exchange of some kind in the future (either for other coins or a good or service). Watch the value of the coin increase (for whatever reason) while informing investors (or contributors) that this is not really a security but a “utility” token that is expected but not guaranteed to become more valuable. Retire early with the prospect of having brokers of expensive real estate in places like London and Dubai come calling.The public tide of opinion, even if regulations are slow to move, is on the side of reform if not outright advocacy.

That will not be the case for the vast majority of ICOs, however, no matter what returns, goods or services they offer. Even if they also have vibrant communities already using their services (whatever those are). It will not be the case for most of the cryptocurrencies upon which such ICOs are based (most at the moment are based on Ethereum, NEO, Hyperledger or combinations of the three). There will be more of those too. And not every blockchain will make it (cryptocurrencies and tokens are based on an origin protocol or blockchain much like computer operating systems are either PC or Mac or mobile phones are Android or Apple). Some speak to one another well. Most do not “exchange” easily – even between themselves – let alone back into good old cash. And while nobody wants to be the Betamax of blockchain, there will, inevitably, be quite a few of them. When that happens, any economic value of the coins and even contractual relationships created with them disappear as well. Add in extreme price volatility in the current market pricing of these tokens, and you begin to get a sense of the risk profile involved in all of this.

The real hurdle, not to mention expense, comes when transferring back from the world of crypto to the one of fiat (regular money). Being a Bitcoin billionaire (there are about 1,000 individuals who own about 40% of the entire global Bitcoin issuance) is no fun if you have no place to spend it.

A Rapidly Changing Marketplace

In the past 18 months, cryptocurrency and ICOs have gotten increasing attention because of the increasing value of all kinds of cyber currency (far beyond Bitcoin). The total market cap for all forms of cryptocurrency itself zoomed past $700 billion at the turn of the year. That is impossible to ignore. You might have heard of some of these currencies too. There is ETH, Litecoin, Bitcoin Cash, Dash, even Dogecoin (created originally as a joke on an internet dog meme). Right now, in fact, at some of the most expansive exchanges, there are literally hundreds of these coins which are constantly bought and sold if not exchanged and used.

paragon advertisement
This has red flags written all over it.

And then there are the sums ICOs are bringing in some cases, flagrantly flaunting regulatory agencies and doing end runs on the global banking system that cannot keep up with them. The top ICO of 2017, a company called Block.one and registered in the Cayman Islands, so far holds the record at $700 million and counting. Filecoin, the second largest ICO last year, raised $262 million in one month from August to September. And then, of course, there is the cannabis industry-specific case of Paragon – now headed for class-action lawsuit litigation over their $70 million pre-and ICO sale intentions.

It would be logical to assume, given the eye-watering sums potentially involved not to mention the large role a smart digital media footprint has to do with an ICO’s success, beyond its service or technology offerings, that this would be a perfect place for cannapreneurs to turn for funding. The global market is opening for cannabis reform at the same time the crypto craze meets Fintech Upheaval is occurring – in fact, these two things are happening almost simultaneously.

Thanks to regulatory realities and an ongoing stigma, there is still no institutional investment in the industry in the United States (that is rapidly changing other places). These are two new industries and dreams are large.

In the legit cannabis space, so are the expenses.

The price of opening a dispensary in most U.S. states tops a million dollars right now. In Europe, the price of entry is even more expensive. A GMP compliant grow facility in Western Europe, plus the money for lawyer’s fees and negotiations for the license itself will set you back anywhere from $20 million and up, depending on the location. Even staying afloat in the industry once the doors are opened is a challenge. And loans, even for outstanding invoices, are still tough to come by in an industry where banking services of the simple business account kind are a challenge. Particularly in the United States.

The public tide of opinion, even if regulations are slow to move, is on the side of reform if not outright advocacy. Why shouldn’t a reform-group-rooted ICO aspire to own or provide ongoing business financing to a community-minded canna farm in California, Canada, Germany, Israel or Australia? Or even Greece?

However, right now, with some noted exceptions, the cannabis business remains at minimum, a dangerous place to consider issuing altcoins that act like financial instruments or raise money with them. Why and how?

Part II of this series will look at the significant liabilities of using cryptocurrency and ICOs in the cannabis industry.

The post Paradox or Paragon? A Non-Techie Look at Blockchain, Cryptocurrency & Cannabis: Part I appeared first on Cannabis Industry Journal.

Source: Cannabis Industry Journal

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