DENVER — Morgan Carr, co-owner of Wellspring Collective pot shop in Denver, recently told the Wall Street Journal that after losing his seventh bank account, he hired a security firm to transport his cash to a vault in a undisclosed location.
The security company Brinks refuses to provide armored cars to legal marijuana businesses in Denver to transfer the massive amounts of cash on hand at their medical and recreational dispensaries.
Thieves have already burglarized Colorado pot shops using guns, bear mace, axes and a circular saw.
Denver District Attorney Mitch Morrissey summed it up sufficiently.
“You hit a 7-Eleven, you’ll get 20 bucks,” he said. “You hit a dispensary, you’ll get $300,000. It’s only a matter of time before someone gets shot.”
But what if there was a way that pot shops could head such a pending incident off at the pass by bypassing the banks that still seem tepid about coming to their aid?
Enter PotCoin, the marijuana world’s answer to Bitcoin. Its founders envision a day when the necessary cash-on-hand at any and all Mile High pot shops could be as insignificant as that of a 7-Eleven.
Launched on Jan. 24 at 4:20 p.m., the cryptocurrency is already being accepted by several online marijuana vendors, including Smoke Cartel, which sells marijuana paraphernalia, Bitcoin Seedstore, which sells marijuana seeds, and Chronic Star Medical, an online store that sells edible pot.
At first, PotCoin’s three developers were reluctant to relinquish their identities, going simply by Hashoshi, MrJones and Smokemon514. That changed on April 9 at the CryptoCurrency Convention in New York City. Nick Iverson identified himself as Smokemon514 and Joel Yaffe as MrJones.
Both have experienced success as entrepreneurs and developers. And now they want to help you get rich in PotCoins.
It starts by downloading an online “wallet.” You can then fill that wallet in one of three ways: 1) You can get paid with the currency by another PotCoin owner, 2) you can purchase the currency on an exchange like AllCoin.com using Bitcoin or U.S. dollars or 3) you can “mine” PotCoins.
“Mining” for cryptocurrency is a complex process that requires users to solve complex math problems through via digital programming software. A success mining effort creates these digital tokens. Here is how you mine PotCoins.
If you were to successfully mine or acquire 420 PotCoins, your cryptocurrency would be worth about $2.48 as of Thursday, according to PotCointoUSD.com.
But in order for PotCoins to attain that suggested value — or any value for that matter — pot shops would have to start accepting the cryptocurrency in exchange for marijuana. So far, it appears none of Colorado dispensaries — recreational or otherwise — are doing that.
Still, Jerry Brito, a senior research fellow who specializes in technology and cryptocurrency at George Mason University, called the idea behind PotCoin “smart.” He told MotherJones.com that “if the customers are savvy enough,” PotCoin could be attractive to Colorado’s marijuana industry that is desperately seeking to find ways to alleviate the headaches that come with boatloads of cash.
Though PotCoins’ Canadian-based developers did not return requests for comment, the Reddit sub-community started by those developers seems to confirm that there aren’t any Colorado pot shops currently accepting PotCoins. In fact, one Reddit community member, who claimed to be a dispensary owner, went so far as to say he “would never accept PotCoin.”
And despite PotCoins effort to become more visible, including setting up PotCoin ATMs at Denver’s 4/20 festival in Civic Center Park last weekend and efforts to donate PotCoins to local dispensary owners to hand out dedicated customers like “frequent flyer miles,” prominent dispensary owner Tim Cullen shrugged when asked about the cryptocurrency.
“I’ve never even heard of PotCoin,” he said.
There are also issues with volatility when it comes to any cryptocurrency, as proven by Bitcoin exchange services like Mt. Gox, which filed for and received bankruptcy protection earlier this year. A quick glance at the Bitcoin Price Index on CoinDesk.com shows just how volatile the digital currency is, as its perceived value has changed by hundreds of U.S. dollars this year depending on the month.
And for as many security issues as Colorado’s marijuana industry has experienced due to its wads of cash, cryptocurrency doesn’t exactly offer its users complete peace of mind. Last month, $400 million worth of Bitcoins were stolen from an online exchange center known at Mt. Gox.
Efforts being made on a federal level to ease the concerns for banks about getting into the pot industry could also eventually deal a blow to PotCoin.
The “Cole Memo” issued by Deputy Attorney General James M. Cole late last year, suggests that banks will not be prosecuted if they do not violate any of the eight priorities set forth in a prior Department of Justice memo. Three of the biggest priorities in that memo are 1) preventing the distribution of marijuana to minors, 2) the sale of marijuana across state lines, and 3) the delivery of proceeds from the sale of marijuana going to criminal enterprises.
The Financial Crime Enforcement Network, an arm of the U.S. Treasury, also issued a seven-page note in February asking banks to use “due diligence” in monitoring marijuana customers. That means reviewing those customers’ applications for state licenses and understanding their “normal and expected activity” — i.e. the types of products they sell and whether they have medical or recreational customers.
To be sure, despite what seems to be some measure of relaxation at the federal level regarding financial institutions’ ability to deal with pot shops, banks remain hesitant. And that will likely continue until there are sweeping changes to federal laws and regulations, according to Anita Ramasastry, a professor of law in Washington, the only other state that has legalized recreational marijuana.
The question, in Ramasastry’s mind? If banks will beat PotCoin or other cryptocurrencies to the punch before the marijuana industry’s cash issues reach a tipping point.
“There is a legitimate void right now that PotCoin is trying to fill,” Ramasastry said. “But recent changes show that the federal government is slowly relaxing its stance to allow for state licensing and regulation of marijuana. If that trend continues, expect banks to make an effort to recapture the business they are currently losing.”