Both the cannabis and hemp industries breathed a sigh of relief this year when the H.R. 1595-Safe Banking Act of 2019 passed the House of Representatives, signifying another step forward for any business working with components of the cannabis sativa plant.
The passage of this Bill is crucial to both industries moving forward and having the same banking protections, and financial infrastructural support, as traditional businesses.
As of March 28, 2019, the proposed legislation passed the House of Representatives and was forwarded to the Senate for consideration. The Safe Banking Act Bill is sponsored by both Republicans and Democrats although the lead sponsor of the Bill is Ed Perlmutter, a Democrat from Colorado, who is serving his seventh term as a congressman.
What Is the H.R. 1595-Safe Banking Act?
The general purpose of the Safe Banking Act is to eliminate the federal grey area that is cannabis and hemp banking. There are currently a handful of banks, in legal states, who are willing to work with cannabis and hemp businesses, however, these banks are few and far between for the fear of federal repercussions.
The Act states, “The purpose of this Act is to increase public safety by expanding financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such businesses.”
The Safe Banking Act would allow banks to provide more ancillary services to new and existing businesses in the cannabis and hemp spaces without fear of federal backlash. This bill is crucial in allowing cannabis and hemp businesses to operate with safe business practices and open revenue channels for businesses who require increased cash flow.
In essence, the bill provides a “safe harbor for depository institutions”.
The Safe Banking Act Will Shape the Hemp CBD Industry
The Safe Banking Act Bill will mark an important benchmark that will allow growth in the existing hemp CBD industry.
Currently, many hemp CBD companies operate as cash-only businesses due to a lack of support from large financial institutions. This means that they can’t undertake any traditional business transactions, from paying their employees through direct deposit to completing purchase orders to pay vendors for packaging and supplies.
These new regulations would help to professionalize and legitimize the cannabis and hemp CBD sectors and allow them to operate just as any other business would. While the Farm Bill legalized CBD for retail sale, it did not take into account the difficulties CBD businesses would face trying to get funding for their endeavors. Until the Safe Banking Act is passed, hemp CBD companies have been forced to find private funding or crowdsource seed money in order to get their business up and running.
Next Steps for The Safe Banking Act
Now that the Safe Banking Act legislation has passed the House, it heads to the Senate for approval. Although the Bill had bipartisan support in the House, it is unclear how the proposed legislation will fare in the Republican-majority Senate. Many Republican members of Congress have stated their preference to wait for full cannabis legalization before passing legislation such as the Safe Banking Act, which will likely be a hot topic for the 2020 federal elections.
For now, it’s a waiting game. There is currently no scheduled date to introduce the Safe Banking Act Bill to the Senate and hemp CBD companies will have to continue to fund their business endeavors using non-traditional financial means.