Earlier this month a major US bank told the Alaska Alcohol & Marijuana Control Office that it can no longer accept credit card payments for licensing fees. This followed on the heels of the closing of several business accounts of marijuana related businesses (MRBs) by Alaska banks and the closing of personal accounts maintained by people with ties to marijuana start up businesses. No explanations for the closures were given either to the State of Alaska or to the account holders. According to Marijuana Business Daily, the bank noted that “marijuana remains illegal under federal law.” True, although marijuana was also illegal under federal law when the bank first allowed the Alaska Alcohol & Marijuana Control Office to accept credit card payments.
According to the Alaska Journal of Commerce, over 300 banks in the US now accept money from MRBs. As we reported earlier, most banks act only as vaults for MRBs and provide depository services but no other traditional banking services such as lending, credit cards and wiring. Part of the problem stems from the credit card companies strict ban on marijuana purchases and the Fed’s unwillingness to provide certain banks with master accounts.
Banking MRBs in the State of Washington may be an exception. Rick Riccobono, Washington’s Director of Banks, was quoted in the Alaska Journal of Commerce as stating that “roughly 90% of all marijuana related taxes and fees pour into the state treasury electronically, not with cash.” According to the Alaska Journal of Commerce, Washington uses two workarounds involving credit cards. One workaround is through a company called PayQwik which is a system similar to PayPal. A prepaid PayQwik account is linked to a credit card card or bank account and can be used to purchase marijuana and marijuana related products. The credit card code for loading a prepaid card is one that the credit card companies will accept and is not a code related to marijuana purchases. The second workaround involves customers using credit cards to purchase Bitcoin, the digital currency, and then using Bitcoin to purchase cannabis. Interesting solution, but given how little most people know about Bitcoin, probably not good for the long term.
In the week that banks in Alaska were busy eliminating MRBs from their portfolio of customers, San Francisco Fed President John Williams gave a speech in Las Vegas in which he told his audience that as more states legalize marijuana, banks are facing “unsustainable tension” that needs to be resolved by Congress. Good luck with that Mr. Williams.