Pubdate: Wed, 17 Feb 2016
Source: Boston Globe (MA)
Copyright: 2016 Globe Newspaper Company
Contact: http://services.bostonglobe.com/news/opeds/letter.aspx?id=6340
Website: http://bostonglobe.com/
Details: http://www.mapinc.org/media/52
Author: Nathaniel Popper, New York Times

AS MARIJUANA SALES GROW, STARTUPS STEP IN FOR WARY BANKS

NEW YORK - When Lamine Zarrad was not at his job as a federal banking 
regulator in recent months, he was spending a lot of time at Denver's 
marijuana dispensaries.

As a federal employee, he could not partake of the drug.

He was there, instead, to pitch the shops on a startup he has been 
working on in his free time and is making official this week after 
quitting his job as a bank examiner at the Office of the Comptroller 
of the Currency, a division of the Treasury Department.

Zarrad's startup, Tokken, is one of several new companies looking to 
solve one of the most vexing problems facing marijuana businesses in 
Colorado and several other states: the endless flow of dirty and 
hard-to-track cash.

Colorado legalized marijuana for recreational use in 2014, joining 
several other states where the drug has been decriminalized in some 
form, but Visa and MasterCard will not process transactions for 
dispensaries and most banks will not open accounts for the businesses 
- - leaving dispensaries dealing with an influx of cash, and nowhere 
good to put it.

Tokken and other startups, with names like Hypur and Kind Financial, 
have been putting together software that helps banks and dispensaries 
monitor and record transactions, with the long-term goal of moving 
transactions away from cash.

Stephanie Hopper, the owner of Ballpark Holistic Dispensary in 
Denver, said the tech solutions could not come soon enough.

"We are all kind of champing at the bit, trying to figure out what to 
do," Hopper said. "We're fighting so hard on so many fronts that 
taking one thing off of us would be such a relief."

Despite the various state laws legalizing it, marijuana is still 
listed by federal authorities as a so-called Schedule 1 drug. Such 
drugs, which also include LSD and heroin, are deemed to have the 
highest potential for abuse.

The Department of Justice has said that it will generally let states 
enforce their own laws on marijuana. And the arm of the Treasury 
Department responsible for enforcing money-laundering laws has 
provided guidelines for banks that want to work with 
marijuana-related businesses. But federally regulated banks have 
generally refused to open accounts, and credit card companies have 
prohibited transactions from going across their networks.

Most of the startups trying to help with this problem are focused, in 
one way or another, on tracking every detail of every purchase in a 
more sophisticated way.

Zarrad is aiming to offer something new - an electronic payment 
system that will not rely on the credit card companies or debit 
networks. Tokken will use the electronic money transfer system in the 
United States known as the Automated Clearinghouse, or ACH, to move 
money from the bank account of a customer to Tokken's bank account. 
Tokken will then keep subaccounts for each dispensary - making it 
unnecessary for the banks to deal directly with dispensaries.
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MAP posted-by: Jay Bergstrom