Recreational marijuana use is now legal in California, Nevada, and Massachusetts. Also, North Dakota, Montana, Arkansas and Florida all expected to approve medical marijuana. With banking services in short supply to pot merchants, Bitcoin may see increased use in the United States as a way to transact for legal pot without having to invest in safes, security guards, and other expensive measures. Two startups--POSaBIT and SinglePoint Inc., ​specialize in facilitating legal pot purchases using Bitcoin.

The Pot Industry Can't Find Banks

Colorado has had legal marijuana for a while now, but merchants have found it difficult to find banking services since it is still a federal law making pot illegal - even if individual states have voted in favor of it. Therefore, without any banks to provide payroll or other financial services, pot merchants have turned to cash only transactions. Cash has problems, however, since it is bulky to carry, and at risk of robbery or theft. Marijuana shops have resorted to expensive, high security measures including safes and security systems with bullet-proof glass to rival a local bank branch. This is a huge operating expense and lowers profitability as well as limits competition. As more states make marijuana legal for both medical and recreational use, the demand for payments services for these providers will only increase.

Enter: Bitcoin. The digital cryptocurrency has been around since 2009 and has proven that semi-anonymous, secure, digital transactions can take place for very low cost. By holding bitcoin instead of physical dollar bills and coins, the need for expensive safes and other measures are obfuscated. Furthermore, since bitcoin can be converted in to dollars in the United States via a number of exchange platforms, some of them compliant with financial regulation, the funds can be safely converted back in to cash if needed. As legal marijuana sales grow, Bitcoin may increasingly become the preferred payment form. (See also: 5 Most Bitcoin Friendly States)

The Bottom Line

Marijuana use has been legalized in more states this election, notably in California and Massachusetts. Since pot is still illegal in the eyes of federal statute, many banks refuse to service otherwise legal marijuana businesses. Bitcoin might be seen as plausible alternative to holding on to large amounts of cash, requiring expensive security measures.

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