5 cannabis banking developments the industry is watching

5 reasons bankers are watching the cannabis industry

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Bank industry eyes are closely monitoring developments in cannabis these days. With a bipartisan group of senators urging House and Senate leadership to include the stalled SAFE Banking Act in a wider bill on the table, along with some regulatory ties around the once-shunned industry loosening, there are no shortage of reasons for their focus.

For insight on these changes and more, here are five recent developments that have the industry paying close attention.

Renewed push for regulation

The decade-long drive to legalize cannabis for recreational and medical use may finally see the light of day at a federal level this year. This comes as great relief to law-abiding cannabis companies that have struggled to access the financial services they need.

As long as the sale or distribution of marijuana remains illegal at the federal level, cannabis companies cannot use depository institutions and payments companies such as Visa and Mastercard.

Today, observers now see renewed momentum in the shape of four legislative paths.

Read more:

Four ways cannabis banking could cross the finish line in 2022

A different path to Senate approval

The stalled SAFE Banking Act, which would allow banks to provide financial services to cannabis firms, received an unexpected lift when a cross-party group of senators exhorted Congress leadership to include the bill in a broader U.S.-China legislative package currently under discussion.

“Allowing cannabis businesses operating legally and in compliance with state law to access financial services without federal reprisal would address public safety and compliance challenges, helping communities reduce cash-motivated crimes,” the senators wrote in a letter to the House and Senate leaders.

The House has passed the SAFE Banking Act 6 times, but the bill has yet to come to a vote in the Senate. The U.S.-China trade bill may be the opening the legislation needs.

Read more:

Cannabis banking bill gets bipartisan Senate push

Leveraging fintechs

A growing number of U.S. banks are moving into cannabis banking despite the legal and regulatory risks.

“With cannabis businesses there is an additional layer of burden in terms of assessing their compliance and maintaining and monitoring their compliance with applicable state law,” said Cliff Stanford, a partner at Alston & Bird. “Some banks say it’s not worth it. Others say there is a lot of money there.”

With the SAFE Banking Act languishing in the Senate, fintech and regtech providers can help financial organizations enter the cannabis banking space now while they wait for federal prohibitions to change.

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Tech helps banks navigate cannabis’ regulatory potholes

How to take the plunge into cannabis banking

By acquiring Century Bancorp, a cannabis banking operation with $500 million in deposits, from Eastern Bankshares, Needham Bank has stolen a march on its rivals who are waiting on the sidelines for federal regulations to change.

Needham CEO Joe Campanelli studied the cannabis industry for two years before making the move and has strong feelings about its cash-based nature. “I personally believe the industry shouldn’t allow cash,” he said. “It should all be debit or credit, so you have an audit trail.”

Campanelli understands why some banks have been hesitant to enter the industry due to legal concerns, but has no qualms himself. “Once you reconcile the federal and state regulatory variance, lots of banks will get in this,” Campanelli said.

Read more:

Why Needham Bank is getting into cannabis banking

Entering the business through acquisition

Safe Harbor Financial’s thriving cannabis banking business, which has almost 600 accounts across 20 states and processed $4 billion in transactions last year, is to be acquired by Northern Lights Acquisition for $185 million in cash and stock.

“The acquisition by Northern Lights will allow Safe Harbor to advance its efforts to remain the premier cannabis financial services provider,” said Safe Harbor CEO Sundie Seefried. “Our goal is to become a one-stop shop for cannabis business financial needs.”

Seefried will head up the new organization and be responsible for expanding its banking services to the burgeoning cannabis industry.

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Cannabis lender Safe Harbor Financial agrees to be sold to SPAC