California is considering setting up a state-owned bank for its newly legalised cannabis industry, which it says has to operate mainly in cash due to federal regulations blocking access to traditional banking.
The issue has taken on a new urgency following the US justice department’s decision to end a hands-off policy towards the legalisation movement and to reiterate that the drug remains illegal under federal law.
John Chiang, the California state treasurer, said his state and others would “need to lead when it comes to bringing the cannabis industry out of the shadows” so it can be properly regulated and taxed.
“We are contending with the emergence of a multibillion-dollar cannabis industry that needs banking services,” Mr Chiang told reporters on Tuesday. “We all know the lack of banking services affects government taxes and forces the cannabis industry to operate in cash.”
Financial institutions risk violating federal law and losing their licences by serving cannabis suppliers and retailers. Some 400 banks and credit unions have taken that risk, according to the US Treasury’s Financial Crimes and Enforcement Network, which has been monitoring the situation since earlier this decade.
California legalised cannabis January 1. Local authorities including the cities of Los Angeles, Oakland and Santa Rosa in California. are already considering whether a government-owned bank would provide a safer option for the industry.
The California treasury says it will study the costs, benefits and regulatory issues involved in setting up a bank at state level. North Dakota is currently the only US state that operates a government-owned bank, with a history stretching back to 1919.
With the number of states to legalise marijuana now at 29, Jeff Sessions, US attorney-general, his month rescinded an Obama-era policy that limited the prosecution of entities selling the drug in states where it is legal. The move added to the cloud of legal uncertainty hanging over the industry.
Mr Chiang, who is running for governor of California in this year’s election, criticised the justice department policy change.
“The current administration is out of step with the will of the people,” he said. “Until the slow, clunking machinery of the federal government catches up with the values and will of the people it purportedly serves, states like California will continue to both resist, and more importantly, to lead.”