A leading cannabis fund will reportedly finance its planned expansion with – what else? –
.That comes
which reported on Monday that “Global Cannabis Capital, or GCC, is preparing to sell tokens on the Ethereum blockchain platform that represent its equity in lieu of a traditional initial public offering of shares.”GCC “had originally planned an IPO or a reverse public offering in pot-friendly Canada next year,” according to
, but has instead opted to pursue “a security token offering in Luxembourg, where regulations are favorable to both cannabis and the issuance of securities using blockchain, which is the technology that enables cryptocurrencies.”“We cannot wait 12 or 14 months to go through an IPO process. Tokenization takes around three months,” Andres Israel, the CEO of Global Cannabis Capital, told
.Global Cannabis Capital’s decision to go the crypto route draws attention to what has become a major policy priority for cannabis reform advocates in the United States.
Due to the federal government’s ongoing prohibition on cannabis, financial institutions are unable to provide certain services to cannabis businesses operating in states with legal recreational pot sales.
The absence of the law has become a security matter, with cannabis retailers in states like Washington – often stocked with large amounts of cash on the premises – experiencing a surge in the number of armed robberies this year.
Turning to Cryptocurrency Amid Banking Roadblocks
To alleviate this problem, the U.S. House of Representatives passed the SAFE Banking Act in February, legislation that would allow state-legal cannabis businesses to gain access to banks and other financial institutions.
It was the sixth time the House has passed the SAFE Banking Act since the bill was first introduced in 2013 by Democratic Rep. Ed Perlmutter.
“Cannabis-related businesses — big and small — and their employees are in desperate need of access to the banking system and access to capital in order to operate in an efficient, safe manner and compete in the growing global cannabis marketplace,” Perlmutter said after the House passed the bill in February,
. “The SAFE Banking Act is the best opportunity to enact some type of federal cannabis reform this year and will serve as the first of many steps to help ensure cannabis businesses are treated the same as any other legal, legitimate business.”The U.S. Senate, where Democrats also claim the majority, has yet to take action on the legislation.
For groups like Global Cannabis Capital, the absence of a cannabis banking law has limited the funding scope. Bloomberg reported that “token offerings could broaden the funding sources available to the pot industry, which can’t borrow money from banks due to the U.S. federal government’s prohibition on marijuana,” and that funding “so far has mostly come from venture capital, wealthy individuals and individual shareholders, rather than institutional investors.”
According to Bloomberg, Israel, GCC’s CEO, said that “GCC will create 100,000 tokens representing its capital stock” to carry out the offering, and that the “fund will probably sell as much as six percent of its equity in token form in several private placements during the next three years before deciding whether to list its tokens on a public exchange.”
“Israel expects to close the first placement by early May. More than 100 investors committed to buying some of those tokens in a presale last month that valued the company at $25 million,” the financial news service reported. “The process isn’t entirely divorced from the traditional world of finance, as investors are subject to anti-money laundering and know-your-client controls by GCC’s bank in Luxembourg. Even so, Israel is optimistic that security tokens will allow the fund to tap a large pool of individual investors seeking exposure to the cannabis industry.”