Massachusetts’ retail cannabis market is perhaps a week or two away. For Massachusetts’ cannabis consumers and business owners, the official start of retail sales has been a long time coming. For regulators and law enforcement, however, several major concerns remain unsettled. Chief among them is the well-known and oft-cited “cash problem,” the lack of access to federally-backed financial services that forces cannabis businesses to be cash-only operations. But swooping in like some deus ex machina less than a week before the Cannabis Control Commission is likely to greenlight the state’s first retail operation, one Massachusetts credit union will provide some key banking services to cannabis companies in the recreational sector.
Credit Union Services Could Get Millions in Cash Off The Streets
The Boston Globe is reporting that GFA Federal Credit Union, a federally chartered small credit union, will provide banking and financial management services to Massachusetts cannabis companies. The announcement makes GFA the first financial institution in the state to open its doors to the retail cannabis industry and comes after more than a year of preparations and research into making it work.
“We’re looking at cannabis business as a legitimate business that wants to be recognized as such and that, without banking services, presents a tremendous public safety issue in our communities,” GFA’s chief executive Tina Sbrega told the Globe. Beginning October 1, GFA will offer cash management, checking accounts, payroll, wire transfers and bill payments.
Those key services could help get millions of dollars in cash off the streets. And for that reason, public safety and law enforcement agencies are praising GFA’s initiative. “Public safety-wise, this is a home run,” said John Carmicheal, Walpole’s chief of police and a member of Massachusetts’ Cannabis Advisory Board. Typically trenchant in their opposition to adult-use legalization, Massachusetts police have consistently expressed their support for bank involvement.
Indeed, giving cannabis companies access to banks gives officials oversight and the ability to monitor transactions between licensed businesses. That, in turn, makes fraud, tax evasion and black market diversion easier to spot. Beyond that, it makes the entire industry and consumers safer; a cash-only operation is much more susceptible to robbery.
Are Small Banks The Answer To The Cannabis Cash Problem?
But law enforcement aren’t the only ones nodding their approval of GFA’s move. Massachusetts regulators and the industry are also feeling relieved that financial services will be available. Banking services don’t just make it easier for customers to buy cannabis with plastic. They also reduce overhead and risk for the businesses. Handling cash transactions is time consuming and expensive on top of the logistics of covering business expenses like payroll.
Despite these benefits, however, most major banks have been hesitant to do business with state-legal cannabis companies. Federal marijuana prohibition presents some serious risks to financial institutions backed by the government. But GFA isn’t one of those massive institutions. It’s a credit union with about $500 million in assets. Both of those qualities mean GFA is unlikely to face an enforcement action from the federal government. It also means its business with cannabis companies won’t put existing clients and investments at risk.
Massachusetts Cannabis Control Commissioner chairman Steve Hoffman hopes more banks and credit unions will follow GFA’s lead. It’s not a bad idea. Smaller financial institutions could step up where larger firms are so far holding back, says Colorado-based Safe Harbor, a company that helps financial institutions work with cannabis businesses.
Could small banks be the answer to the cannabis industry’s cash problem? GFA is optimistic they can be. But they’re starting cautiously. The credit union will only contract with 15 to 20 cannabis companies in the first year. It also won’t offer loans to small cannabis businesses, raising concerns about equity in an industry already dominated by large firms. GFA is assuring prospective clients that it won’t favor large, already-established firms over smaller, newer companies.
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