Top Cannabis FinTech Companies in Web3
Cannabis companies are largely behind the curve in Web3, but in the past few months some top cannabis companies have emerged in the Web3 ecosystem to join the old guard. The connection between cannabis and Web3 may not be apparent at first glance, but both industries are relatively nascent, semi-regulated, and attracting some of the best global talent. This post focuses on cannabis cryptocurrencies and payment systems.
Cannabis companies and web3: a brief introduction
It is no surprise that enterprising cannabis companies that are comfortable operating in their quasi-regulated industry have no qualms about adding additional regulatory uncertainty to their business models by incorporating Web3 applications into their businesses.
Both industries emerged largely from stick-it-to-“the man” counterculture movements, and they have deep global roots and stratified international communities. Many groups in both communities focus on social justice issues. And both communities (and often their service providers) are still operating on eggshells as they wait for firm, definitive guidance from local and national governments. This is the world we work in, and it does not look like full-bore legal clarity in either ecosystem will be emerging soon.
Top fintech cannabis companies in web3: cryptocurrencies
The earliest cannabis Web3 cryptocurrency companies date to 2014, and many are still in existence: PotCoin (POT), CannabisCoin (CANN), HempCoin (THC), and DopeCoin (DOPE). All of these emerged in response to state-legal cannabis marketplaces that were operating almost exclusively in cash.
- PotCoin focused on Colorado’s adult-use market and dove deep into Web3 with PotCoin Rewards and philanthropy with the PotCoin Foundation.
- CannabisCoin focused on improving transactions in medical marijuana dispensaries.
- HempCoin focused on B2B transactions among farmers, manufacturers, and both medical and recreational dispensaries.
- DopeCoin tried to facilitate a virtual black market Silk Road for marijuana sales across the world. DopeCoin was built on a proof-of-stake validation model, which allowed validators to earn additional DopeCoins to reward their support of the DopeCoin network.
The total market cap of these top four cannabis cryptocurrencies is only about $3MM, and although each experienced the post-ICO (initial coin offering) bump, their market caps have consistently slid since then.
These cannabis cryptocurrency companies are still working to alleviate existing market burdens in the industry. Crypto exchanges like these can provide depository services, similar to banks, but with lower fees and access to a myriad of different payment options across borders and within both fiat and virtual currencies.
Moving the industry away from cash will lessen the risk of the overall marketplace and allow lawmakers, regulators, and industry participants to focus on improving the business environment, making better products, and raising industry standards all around.
The tax application is also undeniable. Cryptocurrency transactions are on a public ledger system, which would allow regulators to easily audit companies and individuals for tax compliance.
Top fintech cannabis companies in web3: payment processors
The cannabis industry has ongoing payment processing problems, but the current non-Web3 frontrunners in the cannabis fintech space include CanPay, Hypur, Aeropay, Dutchie, and KindPay. They use ACH transfers or prepaid cards or more creative payment processing methods like revolving lines of credit or cashless ATM transactions outside the cannabis-shy credit card systems.
Many cannabis web3 FinTech companies are developing competing cannabis point-of-sale solutions and application programming interfaces (“APIs”), which are bridges that allow different software or computer systems to interact with each other. These APIs hope to span the deep chasm between traditional banking, cryptocurrencies, and cannabis to facilitate all types of B2B and B2C transactions with the power of web3 cryptocurrencies at their disposal.
Predictably, this business model presents many barriers to entry as they deal with the U.S.’ patchwork of existing and forthcoming cannabis and financial regulations. These types of cannabis fintech companies are required to either partner with existing licensed financial institutions or qualify with state and federal regulators, like Coinbase, which holds money transmitter licenses from many U.S. states and is also registered as a broker-dealer.
If we have learned anything in cannabis and Web3 so far, it is that the pace of business far outstrips the pace of regulation. Smart entrepreneurs continue to ask good questions and innovate their business models according to the prevailing winds.
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Neither Harris Bricken nor I have any financial interest in any of the companies mentioned in this article.