Cannabis Money and Public Banking


The New York Times is paying attention to California’s cannabis money.

Those working in the industry are constantly reminded of the federal government’s power to intervene in their business dealings, including severely limiting their access to the banking system.

“They can come in and ruin your whole life,” said [Sam] Edwards, the marijuana entrepreneur. “They can throw you in prison, take your property.”

Yet, like so many others in the cannabis industry here — there are an estimated 9,000 growers in Sonoma County — Mr. Edwards is pressing ahead with his company, which specializes in growing and selling pesticide-free cannabis products. And he is planning more cannabis and wine pairing dinners.

From Marc Armstrong of Commonomics:

… while it may be considered legal on a state basis, marijuana remains a federally classified Schedule I drug, making it illegal for federally regulated banks to accept deposits earned from cannabis.

So what’s a Sonoma County pot grower, distributor, edibles manufacturer or investor to do?

It’s simple: support the creation of a Public Bank of Santa Rosa, one that is operated and run by the city and whose mission will be to redirect the bank’s credit back into the community through low-interest development projects. A public bank is a win-win: people connected with the cannabis industry won’t have to cart duffel bags filled with cash up and down Highway 101, and county residents will gain from a new source of robust community credit.

Everything Marc Armstrong says applies to Oakland, but more so, because Oakland is bigger.

Writing with Michael Levitin, Armstrong also provided an op-ed piece for the Santa Rosa Press-Democrat.

In order to solve the cannabis cash problem, the public bank will also accept marijuana-related deposits. This “excess” cash can be picked up daily and placed in Federal Reserve vaults and credited to marijuana-related business accounts in the public bank. A web interface will allow account holders to transfer this money to their other deposit accounts with private banks or credit unions also located in California. The bank will need to ensure rigorous compliance with the DOJ’s guidance memo on accepting deposits from all the marijuana-related businesses it serves. Documentation of the origin of the cash will be required to be completed by the marijuana-related businesses before a cash pickup occurs. Enabling smartphone apps that report on specific transactions can help. Other stipulations and practices will be enforced by the bank so that the rudimentary standards identified by the DOJ guidance memo can be enforced. It can also establish best practices in partnership with the primary bank regulatory agencies (the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency) and the DOJ.