US Congress discusses regulation of the Cannabis market with the Federal Reserve

Medical and recreational marijuana has been opening spaces in several countries of the world and, more recently, in the United States. However, it seems that the regulatory frameworks in the great world power are not clear and there has been a discussion between a member of the American Congress and the central bank of this country, known as the Fed or Federal Reserve System. In a hearing that lasted for two days, the president of the Federal Reserve gave his opinion on various issues before the United States Congress, due to changes in the political and economic scenario since he took office in 2018. One of the issues discussed was the legal vacuum for authorized cannabis companies to operate with banks.

Background: marijuana in the United States and its legal status

The issue of Cannabis has become a headache for the American government. Its structure of independent political-administrative divisions makes regulatory frameworks complex, especially for such controversial issues as marijuana. According to the Business Insider analysis, Cannabis continues to make its way in the North American country. Although at the Federal level it is still illegal in the USA. In the US, many states have put to work to legalize their medicinal and even recreational use – the latter with more recent additions. Of the 50 states that make up the US territory, 33 have accepted the medicinal use of this psychotropic. Meanwhile, recreational use is more limited: only 10 states have been mounted on the train. The last to join was Michigan, where recreational marijuana was approved in December 2018.

Since the arrival of Donald Trump in the presidential chair, the outlook seems positive. The President signed in December the Agricultural Law for the cultivation of hemp: a species very similar to marijuana, which also comes from Cannabis Sativa. Apparently, the United States will follow the path of Canada, which legalized marijuana throughout the territory in 2018.

Marijuana regulation in USA

Greater clarity is needed on this supervisory relationship

Now, this ambiguity that arises from the legal gaps of marijuana in the United States has been discussed in the middle of the Jerome Powell hearing. The president of the Federal Reserve has referred to the commitment of banking institutions to the individual laws of each state. He claims that this confusing situation for the legal marijuana trade puts bank supervisors in “a very difficult position.” His assertions respond to the concerns of Senator Robert Menendez. The latter consulted Powell about the Federal Reserve’s opinion about the growing cannabis industry. As CNBC reports, Powell is concerned about this:

“I think it would be great to be clear. It puts financial institutions in a very difficult position and supervisors in a difficult position as well. It would be good to be clear about this supervisory relationship.”

The conflict is very simple: how does a marijuana company, legalized locally, gain access to banking, which is governed by federal regulations? Consequently, these companies choose to trade only with metallic money. This modality makes commercial flourishing difficult in states where regulations exist. It also gives rise to a lack of financial and fiscal control over the industry. Some experts believe that, due to the inevitable expansion of these legalizations, there would be a need to create a separate banking system that can deal with these companies without FED regulation.

Cannabis: explosion in financial markets

Meanwhile, companies linked to the industry show good data in the last year. In an investigation by Grand View Research, it is shown that the industry could grow exponentially in the next decade. According to their estimates, it could be valued at 146 billion dollars by 2025. Some news, such as legal adoption in Canada or Coca Cola’s interest in the creation of cannabidiol drinks, boosted the stocks of several companies in the industry that are traded on the stock market. Currently, the largest marijuana company in the financial markets is Canopy Growth Corp. The Canadian company was the first to operate legally in North America. It accumulates a capitalization of 16 billion dollars, according to Yahoo Finance.

 

You can invest in the world’s most popular cannabis stock CFDs with as little as $ 100 in the Avatrade broker through the following link:


Leave a Comment