Colorado’s Gov. Jared Polis released the state’s Roadmap to Cannabis Banking this month, which outlines Colorado’s “wildly important goal” of increasing the number of state chartered financial service providers serving the cannabis industry by 20% this year.
What Does This Mean?
Due to the disparity between state and federal law, many financial institutions are reluctant to serve the legal cannabis industry for fear of regulatory enforcement. With that said, the cannabis industry in Colorado alone reached over $1.6b in 2019, meaning the size of the opportunity for financial service providers is massive. With many bank and credit union CEOs struggling to find cost-effective strategies to grow deposits, engaging with the growing cannabis industry represents a competitive edge many wish they could leverage. However, the issue remains that the current regulatory landscape is prohibitively difficult to navigate for most institutions. Gov. Polis’ roadmap seeks to address this.
While Gov. Polis has long been an advocate of efforts to legitimize his state’s cannabis program, this roadmap marks yet another high profile public stance from state financial regulators about increasing the cannabis industry’s access to financial services (see: New York’s Department of Financial Services, California’s Department of Business Oversight, and the Conference of State Banking Supervisors). This roadmap sends a strong message from the first-mover in legal cannabis that the financial services industry is primed to partner with the cannabis market to offer more efficient financial services, regulatory oversight, and economic growth.
How Will This Happen?
The Governor’s office will partner with the Colorado Dept. of Regulatory Agencies, which is an “umbrella state regulatory authority that consists of ten distinct divisions, including the Division of Banking and the Division of Financial Services.” This alignment of resources and initiatives is designed to provide regulatory clarity, advocate for legislative action, and identify other opportunities to make financial services as accessible to the cannabis-related industry as those afforded to other industries.
More specifically, the roadmap outlines 7 key tactics for achieving its goals:
- Establish a working group and hold monthly meetings to discuss ideas and progress
- Increase transparency and improve the coordination of efforts between state agencies
- Engage trade associations from both the financial services and cannabis industries to discuss obstacles and tactics to overcome them
- Encourage new and emerging technologies through regulatory guidance to aid in the process of providing financial services to the cannabis industry
- Provide regulatory guidance to clarify state regulator’s expectations and requirements of state chartered financial service providers
- Reduce barriers to entry for financial service providers by evaluating the chartering and licensing requirements for new market entrants
- Demonstrate support at the federal level by aligning with other state’s financial regulators through open letters and advocacy efforts.
Anyone following along will find this development encouraging, not only based on the substance but also the clearly stated and measurable goal of increasing the number of financial service providers who serve cannabis businesses by 20% by June 30, 2020. While public letters, working groups, and proposed regulations are steps in the right direction, we’re particularly excited by the way Colorado has quantified this mission.
We’re continuing to grow the number of financial institutions using Green Check to launch and scale compliant, profitable cannabis banking programs. If you’re in Colorado and interested in learning more about how our experts and technology can help your institution become part of the 20%, then please reach out to learn more!