The SAFE Banking Act passed through the House on September 23, 2021, for the fifth time. While it still has not passed through the Senate vote, it’s clear that this legislation is well on its way to fruition, and it will mean potentially massive changes for banking within the cannabis industry, as well as for CERES.  

The SAFE Banking Act in Review 

The SAFE (Secure and Fair Enforcement) Banking Act was first introduced in Congress in May 2017 to prevent federal banking regulators from punishing banks that seek to work with legal cannabis-based companies.  

The Act was introduced in response to the many challenges legal cannabis businesses face in their operations in the US, including a lack of access to capital, exposure to fraud, and the tax implications of an all-cash industry.  

“Unfortunately, the history of our financial system is littered with instances of bankers, regulators, and the public attempting to deny disfavored groups or disfavored industries access to the banking system. By guaranteeing equal protection, this bill protects the rights of all law-abiding Americans and ensures that the banking system can no longer be weaponized to prevent “those people”—whomever “they” are—from access to our banking system. No government should be able to use the financial system as a back door to block otherwise lawful conduct.”  -Congressman Warren Davidson (R) Ohio

The Benefits of Banking with Cannabis Businesses 

The SAFE Banking Act would allow federal banks to lend openly to cannabis and cannabis-adjacent businesses. These companies would also be able to open bank accounts, maintain a paper trail for employee payroll, and provide retirement benefits like 401Ks and IRAs to their employees.

Some of the most significant implications of the SAFE Banking Act include:  

• Increased Local Business Growth: Since cannabis companies can’t use banks, they have a hard time getting funding for growth. Once the cannabis industry can access banking services, cannabis employees, suppliers, and service providers will be able to perform transactions with relative ease. Thus, injecting more money into local economies and creating new jobs for employees who are not afraid of working in an illegal industry. 
  

• Enhanced Security and Safety: All-cash industries are rife with fraud. One of the earliest sponsors of the SAFE Banking Act, Sen. Merkley (OR), explains that “forcing legal business to operate all-cash transactions invites robbery, money laundering, and organized crime to the industry, making the passing of the Act a public safety issue.” 
  

• Reduced Tax Evasion: Tax evasion is prevalent among cash-only businesses. Making banking legal for cannabis businesses will improve transparency and tax compliance in an industry estimated to be worth approximately $41 billion by 2025. 
  

• Enhanced Tax Collection Efficiency: Cannabis companies are forced to pay their taxes in cash. This presents a challenge for local, state, and federal governments. Access to banking would allow these companies to make electronic payments efficiently and securely. 

Compliance: The Elephant in the Room 

While passing the SAFE Banking Act in the Senate will ignite change and spur growth significantly, it doesn’t solve all the banking problems within the cannabis industry. Specifically, it doesn’t solve one colossal problem: compliance.  

As CEO of CERES, Greg Anderson, notes, “The problem with banking, regardless of the SAFE Banking Act, is compliance. Compliance is expensive and will likely cripple or make banking impossible for all but the largest banks unless they have a compliance program in place. We see this as another opportunity to expand and for further adoption since we are, at our core, a compliance company.” 

The passing of the SAFE Banking Act is a welcome change for everyone in the cannabis industry. But for CERES specifically, it means the opportunity to work with cannabis companies on the blockchain to offer them the transparency and compliance needed to engage with federal banks. 

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Click here to learn how CERES can offer compliance services to bridge banks and cannabis companies.   

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Access our SEC regulation offering circular here.