Following the passage of Proposition 64 that legalizes marijuana for adults over 21, California State Treasurer John Chiang has formed the Cannabis Banking Working Group to develop a plan for giving the state’s cannabis industry access to banking services later this year.
The group has been given a year to develop a solution to the conflict between state and federal laws that has made it necessary for marijuana businesses in other states where it is legal to operate in cash. Federal law currently classifies marijuana as a Schedule 1 narcotic — the same as heroin — which makes most financial institutions wary of doing business with dispensaries and growers for fear they will face money laundering charges.
According to a 2015 report in American Banker, only 266 of the country’s 6,200 financial institutions serve marijuana-related businesses. California estimates that its cannabis industry will take in $7 billion in profits in 2017 and pay $1 billion in state taxes.
The OC Register reported that Chiang has reached out to the state’s congressional delegation as well as to the incoming Trump administration seeking clarification on its stance regarding making banking services available to the marijuana industry. Chiang said he does not foresee California creating a state bank specifically to serve growers and dispensaries, perhaps because Colorado tried a similar approach in 2014 but its application for a cannabis industry credit union was rejected by the Federal Reserve.
The Cannabis Banking Working Group, which consists of 16 members, will meet throughout the state to discuss banking issues. Group member Fiona Ma, Board of Equalization Chairwoman, noted, “The cannabis industry is the largest shadow economy in California. Allowing them banking access would facilitate compliance and bring millions of dollars into our economy.”
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