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Banks, pot businesses cautious about new federal guidance

Friday's joint announcement by the Justice Department and a division of the U.S. Treasury might not be an outright Valentine's Day gift to the nation's marijuana industry, but advocates for legal cannabis use see it as a step in the right direction.

That announcement issued guidance for financial institutions seeking to provide services to marijuana businesses, with the aim of promoting "greater financial transparency in the marijuana industry and mitigate the dangers associated with conducting an all-cash business." 

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 While medical marijuana use has been legalized in 20 states and the District of Columbia and while recreational marijuana use became legal for adults earlier this year in Washington State and Colorado, cannabis remains illegal under federal law. That's why most banks and other financial organizations, fearful of running into federal charges, have ruled out transactions with marijuana businesses.

"Guidance or regulation doesn't alter the underlying challenge for banks," Frank Keating, president and CEO of the American Bankers Association, said in a press statement on Friday. "As it stands, possession or distribution of marijuana violates federal law and banks that provide support for those activities face the risk of prosecution and assorted sanctions."

The Colorado Bankers Association (CBA) believes Friday's guidance simply reiterates federal regulators' current stance on marijuana laws. "In fact, it is even stronger than original guidance issued by the Department of Justice and the Treasury," CBA president and CEO Don Childears said in a press statement.

"After a series of red lights, we expected this guidance to be a yellow one," he continued. "This isn't close to that. At best, this amounts to 'serve these customers at your own risk' and it emphasizes all of the risks. This light is red."

The CBA is supporting a House of Representatives bill, sponsored by Ed Perlmutter, D-Colo., that would stop federal regulators from "prohibiting, penalizing, or otherwise discouraging" banks that provide financial services to marijuana-related businesses in states that legalize and regulate cannabis.

Both bankers and marijuana industry advocates are also concerned that the federal government's current liassez-faire attidude about "legal" cannabis may change dramatically following the 2016 presidential election.

"Policy changes can be changed later on," said Muraco Kyashna-tochá, founder of Seattle's Green Buddha, one of the oldest medical marijuana dispensaries in Washington. "So we get a Republican administration ... in two years; does that spell problems for our industry?"

But Kayvan Khalatbari, co-owner of the Denver Relief medical marijuana dispensary, thinks the current federal guidance is a baby step in the right direction. "I still don't believe this is going to bring most large banks on," he said, "but it will probably make some smaller banks feel comfortable enough with taking on the additional risk of carrying accounts by folks in this industry."

Many cannabis operations say they're waiting impatiently to open a legitimate company bank account.

"Cash is nice enough until you have too much of it, and then all of the sudden it looks different," said Elliott Klug, CEO at Colorado's Pink House medical marijuana dispensaries. "And cash isn't going away, it's just going to hopefully become a smaller percentage of our income."

In the long-term, Klug added, allowing banks and other financial institutions to transact with cannabis-related busineess is "going to mean more investment in the industry. It's going to be greater opportunities to build real, full businesses -- not that we're not real businesses now. But you can really build to scale, and grow like a normal business."

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