Blockchain were born with the bitcoin, conceived as a way to make databases secure but not managed by one single person. This
allows “people who do not know or trust each other [to] build a dependable ledger,” an article from
The Economist explained.
As the technology evolved and has become more programmable, other applications like tracing a product’s identity/authenticity
were found for it. In some cases, blockchain technologies have even managed to replace banks and services like those offered by
Paypal Holdings Inc (NASDAQ: PYPL),
Moneygram International Inc (NASDAQ: MGI) or
The Western Union Company (NYSE: WU), making
transactions faster, cheaper and more secure.
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“While software reduces global inequalities through intellectual capital, the blockchain today is helping to reduce global
inequalities through financial capital,” Forbes contributor Jonathan Chester explained in a
recent piece.
The Marijuana Industry
The legal marijuana industry often finds big hurdles in the banking system; afraid of federal regulators and the money
laundering risk derived from such a cash intensive space, most banks don’t want to open accounts for these companies. In this
vacuum, a few companies have come up with creative solutions.
For instance, Tokken, provides online banking services to companies in the emerging marijuana
industry. As per their site, they offer “safe payment methods to consumers, and a robust compliance platform to partner banks…
[eliminating] the risk of money laundering by creating a virtual barrier to cash transactions.”
“Using an indelible Blockchain ledger to ensure data integrity and a proprietary compliance program based on structured analytic
techniques, Tokken is designed to comply with every relevant regulatory requirement and provide a sustainable banking solution for
the cannabis,” the site added.
CEO Lamine Zarrad recently sat down with Chester and explained that operating in cash costs the marijuana industry between 20
and 25 percent of its revenue. “This is typically lost through the costs of security, storage and shrinkage, a euphemism for
employee theft,” he stated. “In order to get cash back into the banking systems, Marijuana companies will work with holding
companies that will hold funds on behalf of the dispensary, which the dispensary can then access. In order to get funds into the
accounts, these dispensaries need to hire groups of runners who take the cash to ATMs throughout the city to deposit cash in small
batches.”
But, how can the company achieve this without recurring to a bank?
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As Chester expounded, blockchains were created specifically to avoid banks while still meeting most audit requirements — as each
transaction is both public and protected from “book-cooks.” Tokken, for example, notarizes its transactions via Tierion, a platform that “puts an immutably cryptographic summary of business records on the blockchain,
which permits verification while maintaining customer privacy,” Chester concluded.
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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.
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