In order to keep up with the state’s marijuana industry, the California State Senate approves of a measure that would create a bank for the newly legal economy.
The California Senate approved a bill on Wednesday that would create a state bank for marijuana businesses. The measure, Senate Bill 930 (SB 930), received bipartisan support from senators, who voted 29-6 in favor of the legislation.
Strict federal regulations make it difficult or impossible for most cannabis firms to make use of traditional banking services. As a result, even legal cannabis companies must do business largely in cash. The vast amounts of currency present both logistical and security challenges to the industry.
Under SB 930, the state would establish a special charter bank that could issue checks for use by account holders. Businesses could use the checks to pay rent, state and local taxes and fees, and to reimburse California vendors for goods and services. Account holders could also purchase state and local bonds and other debt instruments with the checks.
Sen. Bob Hertzberg, a Democrat from Van Nuys, introduced SB 930, and said in a release that California’s fledgling cannabis economy needs the special bank in order to operate safely and efficiently. The new bank would also increase security at marijuana dispensaries and other businesses, where stockpiles of cash can be a tempting target for thieves.
“The status quo for our growing legal cannabis industry is unsustainable,” said Hertzberg. “It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
New Bank Will Be Separate from Federal Financial System
Hertzberg believes that the federal government will eventually grant the cannabis industry access to the traditional banking system. But until then, the special bank will be able to offer limited services outside of the federal regulatory framework.
“We’re not using the federal system, we’re not using the federal wire,” Hertzberg told local media. “This is a short-term creative approach to deal with this extraordinary problem.”
But some expenses, including payments to suppliers outside California, won’t qualify for payment through the cannabis bank.
Katie Hanzlik, Sen. Hertzberg’s Press Secretary, told High Times that businesses would also not be able to pay their employees with checks from the bank.
“That money would be subject to the federal payroll tax, which would then put it on the radar of the federal government,” she said. “The limited scope of the bill, and of the uses for the checks, was specially designed so that it is a closed loop system that will reassure cannabis companies and banks that they will not have to worry about federal interference.”
State Board of Equalization Member and Democratic candidate for state treasurer Fiona Ma also supports SB 930. She said that the bill would benefit both cannabis businesses and the people of the state.
“California can’t wait to take action,” said Ma. “With secure banking for cannabis through SB 930, the industry will benefit, the state will get a revenue boost, and pot cash will get off our streets.”
SB 930 now heads to the State Assembly where it will be referred to committee for consideration.