Using crypto as an intermediary step ‘could potentially be seen as bank fraud,’ says Smoakland
The test failed, apparently. Given that cannabis is still illegal in many places, this means that Smoakland could be fined or even imprisoned for violating the law. However, their attempt to circumvent this by selling through a credit card provides a window of opportunity for other businesses looking to get involved in the cannabis industry.
After being notified of potential bank fraud, the director of marketing and e-commerce for Smoakland terminated the relationship with their process partner. This raises significant concerns about the integrity of the entire process and calls into question the validity of Smoakland’s claims. While it is early yet in this investigation, it seems that there may be some problems with this startup’s initial offering.
According to reports, there have been similar cases of vendors being hacked where unauthorized access has been attained to the vendor’s systems. This occurs when criminals gain access to a vendor’s networks and exploit known vulnerabilities in order to gain unauthorized access to systems. Once they have gained access, they are able to steal
Cryptocurrencies and cannabis go hand in hand. Cryptocurrencies allow for secure transactions and anonymity, which is ideal for the cannabis industry. Posabit allows users to buy weed with cryptocurrency, providing an easier way for them to purchase the drug. However, this option has since been taken away from the site. It is apparent that cryptocurrencies and cannabis are still not legal at the federal level, meaning payment processors are unwilling to work with companies that participate in either area.
The use of Circle’s USDC stablecoin was recently ruled by a U.S. district court to be a scheme that involves the deception of virtually all of the participants in the payment processing network. The memorandum states that “The Scheme involved the deception of virtually all of the participants in the payment processing network, including issuing banks and credit unions in the United States and Visa and MasterCard, through the use of fake merchant names, fake merchant locations, fake descriptions of the merchant activities, and fake merchant descriptors.” This announcement could potentially negatively impact Eaze’s business as competitors look for ways to undercut its standing with consumers
To further conceal the fact that their business dealings were centered around marijuana, the Eaze founders also directed others to apply incorrect merchant category codes (“MCCs”) to the marijuana transactions in order to disguise the nature of those transactions and create the false appearance that the transactions were completely unrelated to marijuana.
The Smoakland team isn’t discouraged by government disapproval; they know that the best way to succeed is to work within the system. The company has been working on a new payment processing platform that will make it easier for small businesses to accept payments, and they’re determined to get it released into the market as soon as possible.
The announcement from Dillon Technologies that it is partnering with a bank-sponsored merchant services solution signals a shift in the company’s strategy. Previous efforts have been focused on selling its products and charging credit cards, which would be an important advantage for 4/20, the unofficial marijuana holiday.
