Colorado lawmakers on Friday passed a bill that if enacted would lead to the first marijuana financial system in the United States, potentially granting legal cannabis businesses access to the Federal Reserve’s money transaction system.
Traditional banks have been wary to knowingly serve legal and medicinal marijuana businesses because the drug remains illegal under federal law, said the bill’s sponsor, Representative Jonathan Singer.
The cash-only nature of marijuana businesses is making them targets for crime, limiting access to capital, and impeding the state’s ability to track revenues, Singer said.
“This sets up a new type of financial structure to the gap we’re seeing between banking and the marijuana industry,” said Singer, a Democrat.
The proposal calls for new “cannabis credit co-ops” - similar to credit unions without deposit insurance – to be governed by the state’s financial services commissioner. But they would need Fed approval for access to banking services, such as credit card processing and checking accounts.
Voters in Colorado and Washington state passed statewide ballot measures in 2012 legalizing the possession and use of recreational pot by adults. Both states are among 20 that allow the use of marijuana for medical purposes.
In January, the first recreational retail shops opened in Colorado, and Washington is set to follow suit this year.
The Obama administration in February issued new law-enforcement guidelines aimed at encouraging banks to start doing business with state-licensed marijuana suppliers, like those in Colorado, even though such enterprises remain illegal under federal law.
On Tuesday, Treasury Secretary Jack Lew insisted in testimony before lawmakers that it was not tacit approval under federal law.
The Colorado measure passed on Friday on a preliminary vote and will be formally voted on next week. It needs approval by the state Senate and Governor John Hickenlooper to become law.
The banking cooperatives would not be traditional credit unions or banks because deposit insurance would not be required under the measure.
Many have expressed doubts that the Federal Reserve, which requires credit unions and banks to have insurance, would sign off on the plan.