WASHINGTON–Speaking to an industry group here, NCUA Board Member Rodney Hood repeated his call for Congress to act so regulators can put a framework in place to allow regulated institutions to serve cannabis-related businesses.
Hood had earlier made a similar call in August 2021 when he spoke to the Payments, Banking, and Compliance Conference in Washington and urged federal action to normalize banking services for cannabis-related businesses.
Noting that at that time he “was speaking from that perspective – the perspective of common sense regulatory reform in response to a rapidly evolving market reality,” Hood reminded he had emphasized that marijuana legalization is ultimately inevitable on the federal level.
“That was about eight months ago. I would love to be able to stand here and say that since that day, tremendous progress has been made on this pressing issue, and we’re well on our way to having a framework we can use to move forward,” Hood told the meeting. “Unfortunately, I don’t believe that’s the case. At least not yet. I’ll admit I find that frustrating, and I imagine many of you share that frustration. However, I continue to be optimistic about the potential for cannabis banking reform, and we can point toward a number of reassuring signs.”
Progress Indicators
Hood said there have been some signs of progress, such as the passing in the house of the Secure and Fair Enforcement (SAFE) Banking Act, and the growing number of community of federal executive branch regulators who are “taking this issue very seriously.”
“I can tell you the NCUA has an internal working group focused on preparing for what we’ll need to do to respond when the time comes,” Hood continued. “So, know that regulators are working to prepare the ground for what comes next, even if those efforts are not entirely visible right now.”
Another encouraging sign, said Hood, is the various state initiatives to address the banking and tax status of cannabis businesses.
“…We need that federal solution, because the situation as it stands is untenable,” said Hood. “Here we have a rising industry that is growing and will only continue to grow. And yet the basic commercial banking infrastructure needed to provide financial services to this rapidly growing industry is virtually non-existent.”
Citing FinCEN data, Hood said that as of September 2021, there were 553 banks and 202 credit unions providing services to marijuana-related businesses, in accordance with FinCEN’s 2014 guidelines.
NCUA Offering Guidance
Hood told the meeting NCUA is trying to offer as much helpful guidance as possible to the federally insured credit unions it oversees.
“And let’s be clear: normalizing financial services is only one piece of the puzzle. There are a variety of other issues that will need to be addressed either by Congress or by executive branch regulators,” said Hood. “There are going to be regulatory challenges related to the FDA; the agricultural and environmental implications; the law enforcement and criminal justice side; and questions of equity to ensure that the industry is inclusive and all communities are benefiting in a fair and just fashion. Most of these issues are outside my area of expertise and control, and I hope the Emerging Markets Coalition is working with regulators and policymakers in these areas as well to address these challenges.”
‘Growing Sense of Urgency’
After again calling on Congress to act, Hood added, “To be honest, it’s perhaps a little unusual for a regulator to be so vocal on an issue like this – normally, we tend to defer to Congress on these questions and focus on the statutes as they currently exist. However, there’s a growing sense of urgency that something needs to be done, so I’m happy to take what actions I can to help generate momentum.”