California has proposed a bill that seeks to legalize tax payment in cryptos for cannabis-related businesses. The state will allow the businesses to pay taxes in stablecoins that are pegged to the U.S dollar. If adopted into law, the bill will take effect from January 2020.
The bill seeks to solve a challenge that has plagued the cannabis industry for a long time now. With the legalization of marijuana in more states in the last year, the industry has seen increased revenues. Medical marijuana is now legal in 33 states in the U.S, while recreational marijuana is legal in 10.
However, the industry has continued to lack basic financial services from commercial banks. This is because these banks are prohibited from offering their services to businesses that the federal law still considers illegal. They end up having to rely on cash, a method that’s both tedious and very risky.
The bill will allow these businesses to pay their taxes in stablecoins, either directly to the county government or through a payments processor. It states:
“The bill would authorize the department in determining this method to either accept stabslecoins directly into a state-controlled digital wallet or to utilize a third-party digital asset payment processor that allows for the immediate conversion of any payments made by stablecoins into United States dollars and deposit into a state account. The bill would allow the department to consult with the State Treasurer’s office as needed to implement that payment method.”
The use of crypto to pay taxes for the cannabis industry has long been in the making. The state’s Treasurer testified before the House Committee on Financial Services a fortnight ago, detailing how challenging the tax collection process is. Fiona Ma revealed that the medical marijuana industry in California is among the largest in the country, catering to over one million people. By 2020, research indicates that the industry will exceed $5.1 billion in overall revenue.
Despite aggressive growth, cannabis businesses still lack basic financial services. They end up having to carry their money in duffel bags and travel for hundreds of miles to pay their taxes.
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.