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California Bill Would Legalize Crypto for Tax Payments From Cannabis-Related Businesses

California legislators have introduced a bill that would require the state to accept stablecoins from cannabis-related businesses seeking to pay their excise or cultivation taxes.

Lawmakers in the United States state of California have introduced a bill to allow cannabis-related business to pay fees and taxes in stablecoins. The bill was introduced by the California State Assembly on Feb. 21.

Assembly Bill 953 would allow the state, city and county tax offices in California to accept stablecoins — cryptocurrency pegged to a physical asset or a fiat currency — from cannabis-related companies seeking to pay their excise or cultivation taxes, with effect from Jan. 1, 2020. The bill further reads:

“The bill would authorize that city or county in determining that method to either accept stablecoins directly into a digital wallet controlled by that jurisdiction 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 an account of that jurisdiction.”

Cannabis has been legalized in several states in the U.S. However, cannabis businesses have difficulty securing simple financial services from banks, the vast majority of which are secured by the Federal Deposit Insurance Corporation (FDIC), and are thus prohibited from servicing an industry that is still deemed illegal under federal law.

Cannabis dispensaries can hold hundreds of thousands of dollars in cash at any given time. The bill is apparently an attempt to curtail the vast amounts of cash that end up in state tax offices and need to be processed. California State Treasurer Fiona Ma recently testified before the U.S. House Committee on Financial Services regarding the tax collection process for cannabis businesses. She stated:

“Duffel bags and sometimes suitcases of cash would arrive quarterly at some of our designated offices and some business owners had to drive 350 miles to pay their taxes.”

In 2017, the Dash network began implementing Dash as a payment option in the cannabis industry’s point of sale devices. In doing so, Dash reportedly aimed to save the industry 10-15 percent, as the decreased flow of paper money will stymie the need for cash boxes, safes and guards.

Other U.S. states have also introduced bills that would allow tax payments in cryptocurrency. In January, legislators in the U.S. state of New Hampshire proposed a bill to accept Bitcoin (BTC) for state payments. “This bill requires the State Treasurer […] to develop an implementation plan for the state to accept cryptocurrencies as payment for taxes and fees beginning July 1, 2020,” the document reads.

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Pot Publication High Times Now Says It Won't Accept Bitcoin in IPO

Marijuana advocacy publication High Times is walking back a previous announcement indicating that it would accept bitcoin when it launches its initial public offering (IPO).

The company said last week that it would accept bitcoin and ether – the cryptocurrency of the ethereum network – as part of its IPO, which seeks to raise as much as $50 million. At the time, according to a press release, CEO Adam Levin said the company was “taking another step into the future, not only as one of the first cannabis-related brands to go public on the Nasdaq but also as the first to allow bitcoin and ether as part of our public capital raise.”

However, on August 13, it clarified in a filing with the U.S. Securities and Exchange Commission that this announcement was a mistake, and the company would not actually be accepting bitcoin.

“On August 3, 2018, the Company published a press release relating to its Regulation A+ offering stating that it would accept bitcoin as a form of payment for subscription to the Company’s shares,” the filing said, adding:

“This press release was distributed in error as the Company will not be accepting bitcoin as payment for shares. As provided in the Company’s subscription agreement related to the offering, the Company will only be accepting check, credit card, ACH or wire transfer as payment for subscription to shares.”

The filing notably did not mention ether, the other cryptocurrency listed in the press release. High Times did not respond to a CoinDesk request for comment about the omission by press time.

The IPO will remain publicly available through a Regulation A+ exemption, allowing retail investors to purchase High Times’ common stock. The sale will close either when the company raises the target $50 million or on September 12, the planned end date.

Marijuana farm image via Shutterstock

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A 'Yelp for Weed' Startup Is Launching Its Own Ethereum Token

Cannabis social networking platform MassRoots is developing a crypto token and other blockchain-based applications for its ecosystem of more than one million users.

MassRoots outlined its vision in an annual report filed with the Securities and Exchange Commission on Tuesday, adding that it formed a subsidiary – MassRoots Blockchain Technologies – to explore applications of the technology in December. It has engaged software company MEV to work on the development of the applications.

According to the report, the company has moved to sell Simple Agreements for Future Tokens (SAFTs), collecting more than $900,000 between September and January. Of that amount, $250,000 has been invested in the development of “blockchain-powered features and utilities.”

Founded in 2013, the company’s app is somewhat akin to a cannabis-specific Yelp, allowing users to rate cannabis products and strains. The publicly-traded company has had a colorful history, having its app banned from Apple’s online store in a move that was later reversed.

MassRoots explained in the report that blockchain could improve the quality of information available to consumers on its platform, among other things.

“Currently, a number of technology companies are attempting to curate the best information available on cannabis products and strains,” the document reads. “However, the number of cannabis product reviews are low, such reviews are often biased and the most commonly reviewed products received greater exposure than the less reviewed products.”

MassRoots went on to explain that the introduction of a token based on the ERC-20 – running on the ethereum network – standard could create a better system, explaining

“To provide additional information so that cannabis consumers can make better informed purchasing decisions, we plan to utilize digital instruments as a form of reward based currency within the MassRoots platform to encourage high-quality reviews, including reviews of new products, which we believe will also incentivize user-growth and stimulate our platform’s overall activity.”

According to the filing, users will be able to earn tokens through writing reviews. Initially, users will only be able to use the tokens to purchase products and services within the MassRoots ecosystem, but the company said other businesses in the industry – such as vaporizer manufacturers –  could also use the tokens one day.

However, the annual report also disclosed that the company posted a net loss of $44 million for 2017.

As detailed by The Cannabist, a marijuana-industry news site, MassRoots’s report “provides a portrait of a negative-net-worth company that is burning through cash, missing IRS payments and SEC reporting deadlines, handing out stock-based compensation like candy, and operating with no external sources of liquidity.” Whether these issues affect MassRoot’s cryptocurrency ambitions remains to be seen.

Man smoking cannabis image via Shutterstock

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Texas Issues Cease and Desist for Crypto, Cannabis Investment Schemes

The Texas State Securities Board (SSB) executed an emergency cease-and-desist notice against a man for selling unregistered securities tied to a cryptocurrency trading platform.

On Thursday, the agency said Mark Moncher and his company, Financial Freedom Club, had paired up with another individual, Frank Dalotto (who operates 911MoneyStorey, which was also cited) to sell the shares. Though the platform wasn’t named, the SSB said that Moncher and Dalotto promised weekly investment returns as high as 8% in advertising materials circulated online to Texas residents.

The agency also alleged that the parties involved sought to conceal the nature of the investments by sending invoices for watches instead of securities, explaining in its statement:

“Dalotto, Moncher, and their companies are also encouraging investors to commit felony offenses in connection with an initial $2,000 investment in the trading program. According to the order, investors are told that after making the initial investment via a charge or debit card, they will receive an invoice for the purchase of ‘a gold Seiko watch which you’ll never get.'”

“Dalotto’s statements are encouraging investors to file a materially false or misleading written statement with a financial institution, a state criminal offense in Texas,” the SSB added.

Moncher and Financial Freedom Club were also implicated in another alleged investment scheme – this one focused on a cannabis growing operation – that involved another firm called Capital Cash. The scheme appears to be wholly separate from the cryptocurrency trading platform, according to statements.

Yet like the crypto-related investment, according to the SSB, the securities involved were not registered for sale in the state.

In an email to CoinDesk, SSB Enforcement Division director Joseph Rotunda noted that Dalotto concealed a prior criminal conviction for wire fraud from potential investors.

Rotunda said these issues “demonstrate the continued need for … protections.”

“Investors need to continue to be cautious when investing with an online investment program. Their best defense is due diligence, but they should remember that fraudsters may be attempting to thwart their efforts to obtain meaningful information,” he added.

Texas flag image via Shutterstock

Read the full filing below:

ENF-18-CDO-1761 by CoinDesk on Scribd

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Cannabis Publication to Launch on Civil's Decentralized News Platform

Cannabis Wire, a trade publication dedicated marijuana industry coverage, is to launch a newsroom on blockchain-based journalism platform Civil.

According to an announcement from Civil, Cannabis Wire’s newsroom is targeted at offering different types of content for both individual consumers and larger organizations such as farms, lawmakers and lobbyists.

“We’re promoting a more objective standard for responsibly covering the cannabis industry. Many people don’t realize the scope of it today, and the myriad ways it can affect them,” said Alyson Martin, co-founder of Cannabis Wire.

Civil touts a mechanism that can incentivize Cannabis Wire’s newsroom staff to disseminate quality journalism by distributing the content over its decentralized platform. Readers pay for content with cryptocurrency, and the system sidesteps the need for advertisers and avoids political influence.

Newsrooms are self-governed by community members using Civil’s ERC-20 “CVL” token. In addition, the platfrom also boasts that archives are tamper-proof, since content is stored on a distributed ledger.

Civil’s decentralized newsroom received $5 million in funding last October last year from blockchain development firm ConsenSys. As reported, Civil said at the time half of the funding would be used to develop its services.

While still in development and the success of the newsroom’s operation are yet to be seen, Civil has signed up at least five publications, including Cannabis Wire, according to its website.

Cannabis image via Shutterstock

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Wonders of Naming the Company ‘Blockchain’ or ‘Bitcoin’

Bitcoin and Blockchain is all the rage in more than just individual investors’ circles, and companies are trying to cash in on the craze. While some are launching their own ICOs, such as Kodak, others have merely tacked ‘Blockchain’ onto their name and seen success.

In a move that seems dangerously similar to what happened in the 90s with the dot-com boom, the ‘Blockchain revolution’  taken on by some companies requires careful scrutiny as much of it is smoke and mirrors.

Speaking of smoke, the cannabis revolution that followed its legalization in a few states also came with a similar warning from the SEC about business cashing in on that hype.

Bitcoin services

Among the host of companies trying to wrangle their way into the hyped market is the company formerly known as Tulip BioMed – now Bitcoin Services. This change in name and direction saw the company’s stock increase by a massive 43,500 percent last year.

To their credit, the name change came back in 2016 and only took off last year in November with the hype that came with the cryptocurrency market in the mainstream.

Bitcoin Services financial filings from around that time offer few clues that the company was doing anything specific to justify the hysteria. The same can be said of its website, which generally lacks press releases and other investor information, apart from contact information.

Not alone

Bitcoin Services probably takes the top spot in terms of growth thanks to its name change, but there is a host of others that have made anywhere between 309 and 20,445 percent gains thanks to the change, as shown below.

Former Name Current Name Location Trading Range 2017
Tulip Bio Med Bitcoin Servies USA 42,500%
JA Energy UBI Blockchain Internet China 20,445%
Natural Resource Holdings Blockchain Mining Israel 12,021%
Leeta Gold HIVE Blockchian Technologies Canada 6,384%
Grand Pacaraima Gold First Bitcoin Capital Canada 5,897%
Carrus Capital Global Blockchain Technologies Canada 2,900%
AgriVest Americas NXChain USA 1,700%
Bioptix Riot Blockchain USA 1,611%
AE Innovative Capital Bitcoin Group Germany 1,503%
On-Line Online Blockchain UK 1,300%
Long Blockchain Long Island Ice Tea Corp USA 458%
Transeastern Power Trust Plockchain Power Trust Unit Canda 309%

Quick buck

Another worrying trend that is reminiscent of the dot-com boom is that these gains do not last long as people quickly catch on or regulators step in.

Hong Kong-based UBI Blockchain Internet—previously known as JA Energy—soared more than 20,000 percent before regulators halted buying and selling.

Bubble signs?

Those who believe the entire cryptocurrency market is one big bubble often point to the similarities in hype between the dot-com bubble and these happen around companies taking advantage of the mania and speculation.

It remains to be seen if the cryptocurrency market can weather this mania better than other similar bubbles.

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IBM Pitches Blockchain to British Columbia for Pot Supply Chains

IBM is promoting the use of blockchain technology in the legal distribution of cannabis.

According to a document issued to inform to the government of British Columbia, IBM is touting the use of blockchain in order to ensure consumer safety and to include regulatory oversight in the legal distribution of cannabis “from seed to sale.”

The feedback was issued as the Canadian province prepares a regulatory framework for a legalized cannabis industry. According to official statements, the province plans to make non-medical cannabis legal by July 2018.

Describing the technology’s key features, including its transparency and immutability, IBM noted that blockchain would assure the health and safety of consumers through “provenance and traceability” of products throughout the cannabis supply chain, thus eliminating fraud.

The document added:

“[Blockchain’s] relevance to regulating cannabis is similar to its many chain of custody applications in areas such as pharmaceutical distribution and food chains.”

On a concluding note, IBM stated that blockchain could help the provincial government “take control” of product sourcing and sales, thus helping eliminate black market sales “completely.”

IBM has been revealed various blockchain supply chain trials in recent months, including one with Singapore’s port operator to automate the flow of documents between trading partners.

Cannabis image via Shutterstock

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Digital Currency Looks to Solve Cannabis Industry’s Cash Problem

Digital currencies may solve some the legal cannabis industry’s woes by becoming an alternative to cash payments. Despite recent state-level ballot initiatives across the US that legalizes marijuana in one form or another, the drug still remains illegal at the federal level. While it’s unlikely the feds are going to go after legal cannabis dispensaries any time soon, the legal murkiness does create one serious problem.


Banks won’t deal with cannabis dispensaries.

Consider the ramifications. No banking means no payment processing, which means customers can’t use credit or debit cards to make purchases. According to a 2016 survey, 75 percent of customers prefer to pay with credit or debit cards, with only 11 percent preferring to pay with cash.

Unfortunately, dispensaries can’t give customers what they want – payment methods other than cash – because banks won’t do business with them. Consequently, the customer is inconvenienced and the merchant loses potential sales.

A lack of banking causes even more serious problems. Since the industry is forced to accept only cash for payments, marijuana dispensaries are an excellent target for robbers and thieves due to the large amount of cash they keep on premises.

There’s still a larger problem than that, which is perhaps the biggest of all: dispensaries have great difficulty paying their expenses. Utilities, tax assessors and vendors would much rather not be paid in cash, and some vendors may not even accept cash payments.

The cost of protecting large sums of cash is prohibitive. The need for armored cars, safes and guards depletes the bottom line. It’s been estimated that cash handling expenses can amount to 10-15 percent of sales.

Changes are coming

Seeing an opportunity to gain access to a $6.7 bln market, the digital currency Dash partnered with Alt Thirty Six in April 2017. The Dash network, through its decentralized self-funding mechanism, is paying the company $496,000 to integrate Dash as a payment option in the cannabis industry’s point of sale (POS) systems. The vendor also has skin in the game, having spent nearly $700,000 of their own money developing the POS platform.

As part of this arrangement, Dash will be the only digital currency offered by the point of sale platform. According to the budget proposal submitted to the Dash network:

“We have three major verticals identified and solidified reseller partnerships that will adopt the Alt Thirty Six + Dash payment solutions:

  • Independent Software Vendors (ISV) – Music & celebrity apparel company (100+ online stores), online marketing automation partner (600+ clients), and more.
  • Value Added Reseller (VAR) –IBM, Sirius Computer Solutions, Industry Specific point-of-sale (POS) Partners
  • Ecommerce Retailers – Sirius Computer Solutions​”

The vendor has been making monthly progress reports to the Dash community and work continues apace. The platform’s initial release is scheduled for December of this year.

Going mainstream

The road to mainstream adoption of digital currency has to begin somewhere, and perhaps no other industry needs cryptocurrency as much as this one. Many have suggested that digital currencies could gain adoption by saving vendors money on credit card fees, and this is certainly possible. But such fees usually amount to no more than three percent.

With the legal marijuana industry, Dash has the potential to save merchants up to 15 percent, which would be a massive boon to their bottom line. Dash is suitable for point of sale use because of its InstantSend feature. Transactions sent via InstantSend are fully confirmed and irreversible in four seconds. Bitcoin transactions, by comparison, usually aren’t considered fully “settled” until six confirmations are received, which can take an hour or more.

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Paragon Aiming at Mainstreaming Cannabis Industry

The cannabis industry, and the digital currency and Blockchain boom, are in very similar spaces at the moment in terms of their global adoption.

Many are sceptical of both, as there’s a lot of stigma attached to both, but Paragon hopes to take the best of these worlds by combining the burgeoning cannabis economy and putting it on the Blockchain.

Using Blockchain technology’s immutable distributed ledger, an entire economic ecosystem of cannabis can be standardized, as information from seed to seller can be stored transparently on an unhackable ledger.

Paragon’s thoughts are that the cannabis industry needs to come out of the shadows, and in doing so the negative stigma will die off, and a global legalization trend will be driven harder.

It is with this standardized and fully verifiable record of cannabis’ journey, from grower to dispensary, that many of the issues dogging the controversial plant can be solved, says Paragon.

No traditional ecosystem

The business of cannabis has only recently come out of the black market, with 20 states in the US making it legal.

There have been instances of the drug being legalised in other countries, such as the Netherlands and Jamaica, but even in those places the economic marketplace has been poorly constructed.

Paragon Coin is hoping to set a precedent for an economy that has no traditional backbone. Having stepped out of the black market and onto the streets of America legally, there can still be dodgy practices surrounding cannabis’ path from seed to user.

Different aspects in the production and distribution of cannabis work almost independently and in fragmentation of each other. There is no standardization between growers, laboratories and dispensaries.

The economic ecosystem of the cannabis industry is very much every man for himself.

Breaking the stigma

Paragon believes that as much as the cannabis industry is booming and revolutionizing, so is the Blockchain. By combining this product with this technology, it is Paragon’s aim to bring cannabis to the mainstream, break its stigma of being a shady drug, and set in motion a strong push for legalization.

Blockchain technology, Paragon believes, can see cannabis moving alongside Big Pharma in terms of its standardized and regulated ecosystem.

Through Blockchain technology, cannabis bought on the Blockchain will have every piece of information tied to it, from the fertilizer used, water quality, test results, and path to distributors. This is more information than is provided by pharmaceutical companies on their drugs.

Cannabis safe space

Paragon Coin is also looking to go further in creating this new economic ecosystem, with the creation of “Paragon Spaces”, essentially co-working spaces for cannabis startups to incubate innovative ideas for a new market.

Using their Paragon Coin, the entire seed to seller path can be regulated and monitored within this digital currency, but the idea is that cannabis startups in these co-working spaces can also use a specialised cryptocurrency to work around the difficult monetary laws surrounding cannabis world wide.

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