The SAFE Banking Act is making rounds once again as a larger segment of U.S. citizens anticipates its potential implementation shortly.
Ever since the provisions of the SAFE Banking Act were included in the COVID-19 relief bill passed in the U.S. House of Representatives under the HEROES Act, many are still wondering if the Act comes to fruition in 2021. The potential for legalization got a boost on April fools’ day when New York joined 15 other states that have approved marijuana for recreational use. Now thirty-three states have approved it for either medical or recreational use.
Although there is a groundswell to move legislation forward, the White House remains an area of concern due to mixed signals. This has left some cautiously optimistic of White House support, while others point to staffers who recently have either been suspended or asked to resign due to admission of prior marijuana use.
Although President Biden has not thrown his support in favor of moving cannabis legislation forward at this time, Senate leader Schumer who hails from New York does not appear deterred stating to POLITIO, “at some point, we’re going to move forward, period. ”
There could be a massive economic shift if the Act is approved by the House and Senate since the lack of banking services has been one of the greatest challenges faced by the cannabis business industry. Marijuana-producing firms and establishments have been mostly unable to open and obtain bank accounts and are forced to still operate on a cash-to-cash basis.
The problems caused by blocking cannabis-related concerns from banking are growing as the industry continues to expand. Not too long ago Grand View Research valued the U.S. cannabis market size at 11.3 billion dollars in 2018, and the projection is for continued growth. The current size of the industry and projected growth is problematic from a banking standpoint posing both economic and security risks to a business, customers, employees, and the greater community.
States that have approved cannabis often point to the public benefits of allowing banks to legally serve the industry. The benefits include:
Reduced tax evasion
Increased tax collection
Improved community security
Local economic growth
Many in both the House and Senate have concluded that leaving the cannabis industry unbanked is a problem, as the industry currently exceeds $11 billion in size and continues to grow. Current federal law prohibits all financial activity that touches cannabis from entering the banking system, even when that activity is permitted under state law. This means that many cannabis firms and suppliers are forced to operate in cash.
Only congressional legislation can resolve the divide between state and federal law and assist regulatory agencies who supervise banking. To move the process forward support is needed for current cannabis-related legislation that is already in play. This legislation includes:
The Secure and Fair Enforcement (SAFE) Banking Act of 2019 (S. 1200), enabling banks to provide banking services to legitimate businesses that are operating according to state law. The House passed a companion bill (H.R. 1595) last year with broad support.
H.R. 2093 / S. 1028, the Strengthening the Tenth Amendment Through Entrusting States (STATES) Act of 2019
The SAFE Banking ACT essentially states that federal authorities shall not intervene with the operations of the depositary body concerned with state-run cannabis undertakings. It covers financial institutions that want to do business in cannabis legal states with cannabis firms and offers clarification so that financial institutions will not be dealt with or prosecuted by federal authorities for partnering with legitimate cannabis-related companies.
The legalization of banking Cannabis may soon be moving forward. This is welcome news to many in the banking industry who has been reluctantly placed in the awkward position of potentially violating federal law or refusing financial services to a legal sector of their state.
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