California Senate Bill to Establish a State-Run Banking Entity Gaining Momentum

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California
Senate Bill 51 Would Allow Limited Charter Banks or Credit Unions to Issue and
Cash Special Purpose Checks

A bill making its way
through the California legislature would establish a state-run banking entity
that would provide some services to the cannabis industry. According to Insurance Journal, Senate Bill 51, “would create the Cannabis Limited
Charter Banking and Credit Union Law.” The law would allow limited charter
banks or credit unions to issue and cash special purpose checks for certain
uses, such as paying taxes and fees to the state, as well as rent and payments
to vendors.

While some state-legal
cannabis businesses can obtain bank accounts from local banks and credit
unions, such accounts frequently constitute a significant ongoing expense.
Banks and credit unions that serve cannabis businesses typically charge high
fees simply to maintain an account, as the bank must comply with onerous
reporting requirements mandated by the federal government. Providing a bank or
credit union adequate documentation to meet such requirements can also be a
source of increased labor costs for cannabis businesses. Additionally, gaining
a bank account does not give a cannabis business the ability to accept non-cash
payments, meaning that it does not solve the issue of taking in, storing,
accounting for, and transporting large amounts of currency.

Consequently, if SB 51
were to pass it would likely alleviate at least some of the burdens related to
banking. Also, special-purpose, limited charter cannabis banks would presumably
not charge exorbitant account fees, as their express purpose is to expand
banking services to greater portions of the industry. The Journal report notes
that SB 51 has already made its way through several committees with little
opposition and would take effect immediately if passed into law. How much time
it might take for its provisions to be implemented, though, is unknown at this
point.

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