Published 3年前 • 4 minute read

Can Financial Institutions Operate with CBD Companies?

When it comes to the marijuana industry, banks are running scared. Financial institutions want nothing to do with something that isn’t federally legal. With the legalization of hemp growing in the United States in December 2018, the hope was that CBD banking would be a little easier.

This notion was comprehensively dashed as various companies selling products like CBD gummies found that banks kept the door closed. The issue is that the Farm Bill, which permitted hemp cultivation, did not legalize CBD or any other cannabinoid. At the time of writing, the FDA has only approved Epidiolex, a synthetic drug that contains CBD. Therefore, in a legal sense, companies face the same issue with CBD banking as cannabis.

If there was any doubt, the Federal Trade Commission (FTC) actions in 2019 was a reminder. The FTC wrote warning letters to three unnamed CBD companies. It reminded these organisations that advertising any such product as a way to “prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims” was illegal.

Remember, CBD remains a Schedule I substance as part of the Controlled Substances Act. Incredibly, a non-intoxicating substance with a good safety profile is classified the same as heroin!

The FDA has the authority to regulate hemp and CBD as part of the United States Food, Drug, and Cosmetic Act. At present, the FDA doesn’t distinguish between CBD derived from hemp and marijuana. As a result, finding suitable CBD banking is a challenge for companies.

Can Financial Institutions Operate with CBD Companies

Why Is It So Hard to Find CBD Banking?

The market is loosely regulated since the government has yet to legalise CBD. It is an exceedingly odd situation because most of the hemp grown in the US, UK, and other countries is for the CBD market.

Initially, it seemed like CBD banking wouldn’t be an issue. Although cannabidiol isn’t technically fully legal, brands can sell it in the vast majority of American states. It is also possible to sell it in dozens of countries without any problems.                                                                   

Therefore, a financial institution called Elavon soon got involved. With the backing of US Bank, its parent company, Elavon offered electronic processing for CBD retailers. It was a massive breakthrough for the industry. It approved thousands of applications from cannabidiol sellers and soon became the largest CBD merchant accounts provider in America. 

However, in March 2019, Elavon dropped a bombshell. It said it was no longer offering CBD banking services to new clients. Worse still, it informed existing clients that they had 45 days to find a new service. Clearly, Elavon decided that the risk was far too high. CBD merchant accounts are exposed to a high level of fraud and chargebacks.

Unfortunately, it is just as difficult to find CBD banking in other countries around the world. We have heard of businesses being rejected by banks such as Lloyd’s and HSBC in the United Kingdom. This is even though you can buy CBD products in High Street stores like Holland & Barrett!

British banks have the same aversion to risk as their American banks when it suits them. Customers are beginning to discover that the existing banking system is of little use.

Will Financial Institutions Change Their Tune?

The only way that they will offer CBD banking is if the cannabinoid becomes legal in their country. Their main concern is that offering services to CBD companies could see them lose their license. It is the same situation with marijuana, of course.

It is extremely rare for any cannabidiol business to secure an account with a traditional bank. We heard of one company that got lucky because the bank’s branch manager was an avid supporter of CBD oil! However, that individual is taking a significant risk.

There is hope on the horizon in the United States, at least. The SAFE Act protects financial institutions that work with CBD and marijuana companies from prosecution. Perhaps surprisingly, Mitch McConnell, the Senate majority leader, hasn’t tried to shut it down and is seemingly offering mild support.

If the SAFE Act makes it into law, it will give financial institutions one less excuse to withhold CBD banking services. However, it only seems likely if the Democrats control the Senate and Congress after the next elections.

Should the SAFE Act make it into law, it will likely have reverberations around the world. After all, the United States used its international influence to ensure cannabis was banned globally in the first place. Perhaps it will do the opposite in the next few years. This would be excellent news for UK-based organisations such as Provacan. It is one of the top-rated CBD companies in the business and sells premium-quality oils, edibles, topicals, and more. Check out its official website to find out more.



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