As cannabis banking continues to be a struggle more and more owners are turning to creative strategies in order to avoid the proverbial “cash in the mattress” storage method. Physical cash on hand presents a unique set of risks outside of accounting challenges. Cash is easily stolen, making cannabis operations susceptible to everything from petty theft from staff to being targeted for break-ins. Liability and property insurance typically has small cash limits on their policies leaving cannabis business owners with little risk assurance in this area.
As such, crypto currency has garnered increasing attention from those operating in cannabis space. Crypto markets have remained largely unregulated, meaning they carry their own version of risk. However, currencies like Bitcoin have started establishing worldwide ATM locations which would allow cannabis business operators to safely deposit their physical cash and turn it into crypto-currency. As the crypto world progresses, it is also now easier for crypto owners to make regular every day purchases using their MetaMask wallet.
The downsides to crypto currency still include the lack regulation in the market, the potential for volatile pricing, and the lack of record keeping, especially if the currency is being used for business purchases. We highly recommend that cannabis business owners do their research prior to using crypto as a cash solution.
Crypto also comes with a unique set of tax rules that doesn’t necessarily mirror traditional investment funds. For example, crypto currencies are prone to “splits”, meaning you may receive coins in one currency just for holding coins in another. These “splits” are required to be reported for tax purposes in the year they are received regardless of whether they are cashed out. We highly recommend speaking with a tax professional versed in crypto-currency transactions before filing your tax returns to ensure you don’t misreport your transactions.
With the SAFE Banking Act still feeling far away from passing through the Senate, we expect crypto to continue to build a loving relationship among cannabis business owners over the next year. We highly encourage our clients to do their own research or contact us for a consult.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
