CEOs of several leading cryptocurrency and cannabis companies gathered in New York this week to debate the wide-open future of these two bright-burning investment spaces.
At Proactive Investors’ inaugural CryptoCann symposium, business leaders and investors assembled to discuss all of the ways in which cryptocurrency and cannabis companies—"two industries with an attitude problem"—can combine forces and do business together while they are both in fledgling stages of development.
“Blockchain and cannabis are perfect bedfellows,” said Jeff Koyen, chief executive of 360 Blockchain (OTCMKTS:BKLLF), a group that invests exclusively in blockchain-based technology.
As keynote speaker, Koyen kicked off the two-hour event, which was held Wednesday evening at the 3 West Club in New York City and featured four presentations as well as a panel discussion.
Koyen argued that cannabis companies can only benefit from a tie-up with crypto companies given that cannabis suppliers would be helped by smart contracts, digital currency payments and instant record keeping.
Indeed, blockchain technology can solve a number of the cannabis sector’s problems, ranging from figuring out how best to handle retail payments to the management of its supply chains and its banking needs, according to Koyen.
This month’s news that President Trump supports legislation to protect states where marijuana is legal from a crackdown by US Attorney General Jeff Sessions was cheered by Koyen.
“Legislation is catching up with the industry. It’s not clamping down. It’s not always bad news,” he said.
Up next was John McMullen, chief executive of LGC Capital (OTCMKTS:LGGCF), an investment company backing a wide network of cannabis growers and retail outlets selling everything from hemp-flavored beer to medical cannabis. “As these companies get going, we want to go from seed to shelf to medicine cabinet,” said McMullen.
LGC has been on the acquisition trail of late. This year, for example, the company entered into a US$4mln secured debenture with Quebec-based medical cannabis company Tricho-Med, which converts into a 49% equity interest and a 5% royalty on net sales once Tricho-Med obtains a license to produce medical cannabis.
The company recently acquired a 15% interest in Little Green Pharma, a Perth, Australia-based medical cannabis company, for US$1.5mln.
Digital tokens for tokes
Jason Priest, chief executive of privately held BlowFish Technologies, a blockchain group, also delved in detail about the natural synergies that connect cryptocurrency and blockchain companies with the cannabis sector.
The use of marijuana remains illegal in the US on the federal level despite nine US states legalizing its use on a recreational level and 29 states recognizing medical marijuana poses considerable legal complexities when it comes time for cannabis dispensaries to accept payments.
Priest said that dispensaries process millions of dollars in cash because of the unavailability to legally deposit funds in a federally-regulated bank. Another problem is that credit and debit cards are out of reach as a form of payment processing, which leaves customers limited to paying cash.
So these businesses and their customers have to look for alternative solutions.
“With little to no transaction costs, digital tokens will allow consumers to efficiently make purchases at marijuana dispensaries,” said Priest. “Open ledger technology enhances payment security and enables the transparent tracking of revenue and state taxes.”
Investors remain intrigued
The presentations by the three CEOs, which also featured a talk by Eric Baum, who sits on the board of the cannabis packaging group Kush Bottles Inc (OTCMKTS:KSHB), were met with both enthusiasm and caution by a full house of high net-worth individuals, fund managers and private investors.
One investor representing a hedge fund, who declined to be named, said that while he was curious about their prospects, he still thought directly investing in crypto companies was high risk.
"We still prefer to buy into the pick-and-shovel companies which support blockchain companies," he said. "Blockchain is the technology which will eventually support a range of industries, but we like to play the companies which sell products to crypto companies. Maybe, our view will change at some point."
At the night's end, Simeon Wohlberg, a senior executive with Uptick Capital, an investment partnership, was far more optimistic. "I thought the companies which presented were intriguing, My questions are about their valuations," he said.
Pascal Nigen, managing partner with Alpha Bronze, an investor relations firm, took a similar view. “It was interesting to listen to the CEOs of these companies. It was quite useful." For his part, Nigen was cautiously weighing the investment case for both sectors.
“These are new emerging spaces. On the cannabis side, there is already a market, but the market is moving from being unofficial to official,” he concluded. “As with every stock market investment, you need to be cautious and do your due diligence. The situation is somewhat like in 2000 with the internet sector, we had some very big winners. The same rationale applies to blockchain and bitcoin.”