When does an alternate currency allow you to legally transact a Schedule 1 drug? When you are the 6th largest economy in the world.
My life has been like a Forrest Gump movie from the moment I uttered the words, “Seed to sale tracking,” having not the slightest clue that cannabis is not grown from seed. I am also not a lawyer, so please don’t take anything I say seriously, legally.
I have been studying alternate currencies and their applications to the cannabis industry for four years. I am a huge fan of the Blockchain, for its incorruptibility, transparency and distributed logic. It has the potential to create an environment where accountability and taxation is possible and dangerous cash is taken off the streets. But it seems that using an alternate currency for a questionable transaction would simply highlight the offender to authorities. Kind of like the way that Burning Man is the one place where police arrests for drugs are successful.
But what if the offender is the state of California? Every state that has a regulated cannabis program is complicit in the drug transaction of a Schedule 1 substance. Let’s say that California develops and uses the “Nugget,” an alternate currency fixed on a $1 to ^1 (my Nugget symbol) ratio and guaranteed to keep cash based assets in equivalent to the Nugget. This would solve the crazy ups and downs of untethered digital currencies and peg the Nugget to the dollar. The State would send armored trucks to the dispensaries to pick up the cash that is validated by their Seed to Sale transaction system. California would store the U.S. cash in the same vaults they used when State banks held cash. Life is like a box of chocolates
California would mandate that 100% of all wholesale Schedule 1 purchases be made in Nuggets. Nobody could sell their homegrown directly to a dispensary anymore. “Seed to Sale” Tracking would more accurately be “Clone to Nugget.” This addresses the issue of handling cash in such large quantities and the related public safety issues. Using Nuggets, the State could ensure taxes are paid and the money meets FinCEN guidelines. Perhaps California could handle rent and payroll using Nuggets. Anyone receiving Nuggets could exchange them back with the State for cash, taxes conveniently removed. The Nugget would actually be an asset backed currency, unlike the dollar. Paradox?
This would make California the central repository for cannabis related transactions, without having to charter a bank or transact business on the Federal Reserve ACH system. California would do this by removing the pseudonymity of bitcoin, and using smart contracts, the underlying Blockchain technology, with a permissioned system. The Federal Government considers tokened currencies to be treated as securities not currencies, so the idea may have wings.
There are hundreds of alternate currencies out there that would give their left Bitcoin to be the Nugget of California. The economic and political repercussions of a state backing an alternate currency as a way to circumvent the federal lack of leadership would truly be a story of legend.
In full disclosure, this idea was brought to me by Fiona Ma. She is an American politician and member of the Democratic Party who has represented the second district on the California Board of Equalization since 2015. She is running for California State Treasurer and has a solid grasp of the intricacies of the problem.
According to Ma, “Technology and a cash-free society are here to stay. A permissioned Blockchain presents a secure ledger for peer-to-peer transactions that could create a digital paper trail for auditing purposes.”
I have been unsuccessfully trying to help Mrs. Ma solve the banking problem in California for years. She may have solved it! When I first wrote that I did not believe an alternate currency would successfully circumvent the legal framework for Cannabis, I had not considered the ramifications of a State the size of California taking on the task.
Is this just an idol threat to force the Federal Government to solve this problem by passing the SAFE Banking Act? It has a better chance of working, both as a threat and as an actual implementation than does a State run bank. And if it was implemented, the Nugget could revolutionize our entire financial system.