California lawmakers have voted to authorize the establishment of state-chartered banks for the limited purpose of serving the marijuana industry.
The state Senate approved the measure on Wednesday by a 29-6 margin. It aims to solve a problem that has long bedeviled cannabis businesses from coast to coast: Most banks and credit unions are unwilling to serve the pot industry because the drug remains illegal under federal law.
California is one of nine states that has legalized the recreational use of cannabis.
“The status quo for our growing legal cannabis industry is unsustainable,” Sen. Robert Hertzberg, a Democrat who is sponsoring the bill, said in a press release.
“It’s not only impractical from an accounting perspective, but it also presents a tremendous public safety problem. This bill takes a limited approach to provide all parties with a safe and reliable way to move forward on this urgent issue.”
The legislation, which moves next to the California Assembly, would provide for the licensing and regulation of what it describes as cannabis limited charter banks and credit unions.
Once a financial institution obtained a license under the law, it would be allowed to issue special purpose checks to cannabis businesses that open accounts, according to a summary of the legislation. The checks could be used to pay rent and taxes, and to make payments to California-based vendors, but not for much else.
Banks and credit unions licensed under the legislation would be able to form a network to facilitate the provision of cannabis banking services, but the legislation would bar them from engaging in banking activity with any other bank or credit union.
The legislation also states that any financial institutions established to serve the marijuana industry would be required to cooperate with the Treasury Department’s Financial Crimes Enforcement Network and to adopt policies designed to achieve the goals outlined in the Bank Secrecy Act.
Separately, the California Assembly voted Thursday to defeat a bill that would have banned high-cost consumer installment loans of between $2,500 and $10,000. That measure, which was backed by consumer advocates, lost by a 25-23 margin.
Democrats currently have two-thirds majorities in both the California Assembly and Senate.