After the 2018 Agricultural Improvement Act, or Farm Bill, passed last December, consumers wanting CBD oil for pain management got excited for the relaxed restrictions on hemp-based goods. But there are some financial issues you need to be aware of that make buying and selling cannabis a tricky concept. The politics and directives surrounding cannabis are going through a significant transformation, and the banking laws are a crucial element of cannabis’ legislative reform.

The Rundown of the 2018 Farm Bill

Before we get into the newest developments on the banking reform surrounding the commerce of cannabis, let’s talk about the foundational circumstances that got us to this point.

Last December, President Trump signed the 2018 Farm Bill which, among other things, declassified hemp as a controlled substance. It categorized the plant as an agricultural commodity instead.

Hemp refers to a strain of cannabis that contains less than 0.3% of THC, the psychoactive compound found in marijuana that causes the euphoric effect when ingested. Any cannabis strain with more than 0.3% THC is still illegal under federal law. This reclassification of hemp removed it from under the purview of the Drug Enforcement Administration, which in turn, allows hemp producers to participate in interstate commerce legally.

How Does That Affect Banking Policies?

By opening up the U.S. market to hemp and hemp-based products, now federally regulated institutions can actively invest and participate in the burgeoning hemp industry. So businesses such as banks, credit card companies, advertising platforms, and e-commerce sites can get in on the growing hemp trade.

Manufacturers of hemp products can apply for business loans. Hemp farmers have access to crop insurance. All of these small steps are paving the way for more regulation reform.

The New Cannabis Banking Developments

Cannabis, as a whole, is still illegal on the federal level. So even though some states have legalized the use of medicinal marijuana and CBD oil for pain relief, the retailers and producers of those goods have not been able to use federally insured institutions in the transactions.

The Senate Committee on Banking, Housing, and Urban Affairs acknowledge that the inability of reputable business owners to deposit profits in federal banks is a liability. Without a safe financial haven, these small companies are forced to be cash-based operations, which leaves them vulnerable to robbery. Also, the lack of paper trail for business expenditures, profit, and loss statements, and sales makes tax time very difficult for both the cannabis entrepreneur as well as the IRS.

Currently on the legislative table is the Secure and Fair Enforcement Act (SAFE) that would allow federal banks to work with cannabis enterprises in states where it is legal. It would clear the way for small ventures to apply for financial backing and encourage stable growth in an ever-expanding industry.

Government Representatives have been working on this measure for the last six years. But even if it passes, there are still many advancements that need to take place on a myriad of socioeconomic fronts to untangle the conflicting directives surrounding the cannabis trade.

The Take-Away

The House of Representatives passed the SAFE Act, and the Senate appears to be viewing it favorably in their deliberations. However, there is still a lot of work to be done to create a regulated banking system for the cannabis trade.

The majority of states have introduced some level of legal cannabis consumption. There continues to be an increasing number of peripheral industries affected by the changing legislature surrounding hemp and cannabis, both at state and federal levels.

The recent Senate hearing regarding the SAFE Act is a significant step towards a comprehensive overhaul of the statues for the legal production, sale, and consumption of cannabis.