SACRAMENTO, Calif.–With recreational marijuana becoming legal in California on Jan. 1., this state’s regulators have proposed creating a special, private-sector banking system that would allow banks and credit unions to serve the cannabis industry without inviting federal sanctions.
During a meeting of California’s Business, Consumer Services and Housing Agency here, representatives of banks and credit unions were on hand for the discussion of creating a network for financial institutions that have marijuana clients, according to Law.com.
According to Agency General Counsel Peter Williams, the plan calls for banks and CUs to agree to become “central correspondent” banks and conduct transactions on behalf of other network institutions—most likely the small, community institutions that serve marijuana growers and retailers, Law.com reported.
Cannabis business transactions would be segregated from other normal banking activities.
Williams said the state’s Department of Business Oversight, which regulates credit unions and banks, would “maintain a presence” at correspondent banks to watch for any irregularities in the volume of cash handled or the numbers of transactions recorded by both the network and central banks.
“We think this presents to the federal government something which they have not seen before, which is complete transparency in the banking system,” Williams was quoted by Law.com as saying. “We’re also coupling that with the fact that we’re going to have three licensing entities that are going to be heavily regulating this industry in a manner that is more detailed and more specific than any other state. And banks will have access to those databases so they can know their customers and make sure that their customers are doing everything within the law of the state of California.”
As CUToday.info has reported extensively, federal prohibitions on any cannabis-related business has put financial institutions in a difficult position of trying to meet consumer needs while not being subject to a federal crackdown.
In January, 2018, a multi-billion recreational pot industry will begin operating, putting significantly more cash on the streets with no place to legally and safely deposit it.
California State Treasurer John Chiang has also been working to find a solution to the challenge.
Williams told Law.com that he and Jan Lynn Owen, commissioner of the state Department of Business Oversight, also presented the idea to federal regulators.
“Each of them gave us a generally positive response to our idea,” he was quoted as saying. The Federal Deposit Insurance Corp. “said they would treat cannabis banking in the state of California like they would treat any other high-risk cash-intensive business and all the compliance that goes along with those kinds of businesses.”