DENVER—A start-up is attempting to build a bridge between financial institutions and legal marijuana sellers.
Tokken is a secure mobile payment option coupled with identification checks that meet financial institutions’ stringent requirements. It was founded by a former Marine and regulator at the U.S. Office of the Comptroller of the Currency, Lamine Zarrad, CNBC reported.
As CUToday.info has reported, many banks and credit unions are choosing not to serve legal marijuana businesses because marijuana remains illegal at the federal level.
How does Tokken work? First, a purchaser agrees to let Tokken verify they can legally purchase marijuana. That verification may include checking mobile carrier records, gathering bioidentification data used to log into a person’s phone or triangulating who you are based on GPS coordinates, CNBC noted.
Once a person’s information is confirmed, they can upload their credit card information to the app. When they want to buy marijuana, they simply provide a numerical code to give to the cashier.
To get financial institutions to back the marijuana-related businesses, Tokken turns credit card transactions into a digital token. Those tokens can be exchanged back for money that can be deposited in an account at an FI. All the transactions are logged publicly through a blockchain ledger, the same process that makes bitcoin completely anonymous and verified at the same time, CNBC noted.
FIs feel safe accepting this money because they are sure the purchases are legal, Zarrad told CNBC. It helps that Tokken uses some of the same security regulatory protocols the government uses, he said.