Why This Start-Up Could Completely Over-Ride Trump's Big Marijuana Crackdown
Lauren deLisa Coleman , CONTRIBUTOR - Forbes.com
'420' revelers are using this day not only to defy and celebrate, but also to prepare for a fight. The Trump Administration vow that there will be "greater enforcement" of federal marijuana laws has ruffled more than a few feathers, many of whom are part of the 80+ million Millennial demographic. The White House stance on marijuana will be cause for the next big narrative in the U.S and will further demonstrate the larger divisive trend in cultural values. Bold moves to defy any notions of crackdowns are already in motion. However tech just may provide a very sound way to least address some of the financial issues that contribute to the marijuana controversy. Enter Tokken a new, secure mobile payment option for the cannabis industry whose mission it is to help shield businesses from the Trump administration’s recent threats. Tokken has actually developed a way to offer an intermediary service that gives banks legal certainty and cannabis businesses an escape from the security risks and financial strain of dealing in cash. The model is so revolutionary that it may give all stake-holders in this game a run for their money, literally.
The cannabis controversy is not one that is purely about morality. No, this is also about a significant amount of money - who gets to keep it, how it gets tracked and how it is exchanged. "The industry was estimated at $7 billion dollars in 2016, but with more states moving to legalize, and California going live with recreational marijuana next year, many projections indicate that the cannabis industry could exceed $22 billion by 2021." explains Lamine Zarrad, Founder and CEO of Tokken. " In addition, many cannabis ancillary businesses are creating jobs and boosting the economy."
Within all this cash, Tokken saw an opportunity and launched its beta in October 2016 offering an intermediary service that gives banks legal certainty and cannabis businesses an escape from the security risks and financial strain of dealing in cash. Since the company launch, it has become operational in five dispensaries across Colorado. "We are working to integrate with a cannabis-sector PoS provider and soon scale up our services to all cannabis legal states," says Zarrad. And it seems that the company is armed with the experience and credibility to achieve their goal. Zarrad, himself, is a former regulator with the U.S. Treasury’s Office of the Comptroller. His team is also comprised of former U.S. Treasury, CIA, NSA, and Palantir employees. "Tokken is very passionate about our mission and we hope that President Trump would follow-through on campaign rhetoric in support of states’ rights on the matter of cannabis legalization. If so, there is a real opportunity to work with state revenue services. We're talking about the opportunity of a life time." says Zarrad.
"Tokken has developed a rigorous risk assessment model based upon best practices from the U.S. intelligence community and by doing so, provide banks with legal certainty. Our compliance platform also falls in-line with all necessary federal rules and guidance such as BSA, Cole Memo, FinCEN, for payment processing and banking cannabis. And we vet our dispensary partners thoroughly before providing them with services," Zarrad explains.
This offering is critical because dealing in cash causes a number of issues for cannabis dispensaries. First, holding copious amounts of physical cash makes one very susceptible to armed robbery. Many businesses spend hundreds of thousands to millions of dollars in armed services to protect warehouses containing cannabus. Employee theft is more likely to occur with the presence of cash, as well. In addition, paying bills, taxes and staff gets a bit tricky when one deals solely in cash. Such circumstances can contribute to money laundering. Tokken helps to banish such laundering fears through its blockchain ledger technology that essentially creates a virtual barrier. Zarrad says, "Look, by handling money in digital form, we’re able to track every penny carefully and there’s much less risk of being able to 'cook the books.' " He continues, "Our redundant blockchain ledger is a secondary method to verify that the original accounting ledger hasn’t been tampered with, since blockchain is a public record that is unalterable and impossible to erase. And our due diligence when on-boarding dispensary partners allows us to make sure all staff involved with the dispensary are properly licensed and badged, and haven’t had any nefarious history of things like drug trafficking, affiliation with cartels, terrorist financing,"
Once all that is set, here is precisely how Tokken works. For end-users, there’s the TokkenPay app. To build an account, a customer is only asked for name and phone number. Based solely on that information Tokken's technology can verify age and a few other compliance parameters. Those customers can simply add a credit or debit card to their TokkenPay SmartWallet and use their app at the point-of sale to purchase their goods
For Tokken's dispensary partners there is a web-based dashboard where they can monitor TokkenPay transactions. After a rigorous background check, they are assigned a risk assessment score, which the allows Tokken to determine a fee structure for the business. Then the company is paired with one of Tokken's partner financial institutions. Tokken's compliance department vets all end-users and dispensary partners, and performs regular and meticulous check-ups. They also file Suspicious Activity Reports (SARs) in accordance with FinCEN guidance.
Zarrad’s inspiration for such a pain-staking mission was twofold. During the time he worked as a bank examiner for the U.S. Treasury, he noticed where state and federal laws are at odds with one another, how federal rules around legal cannabis are ambiguous, how many reputable businesspeople seeking to enter the industry were being denied basic services and how banks struggled to mitigate risk of cannabis clients and avoid punishment from the federal authorities. Although Zarrad’s role as a bank examiner was to uphold the letter of the federal law in how banks operate, his personal feelings were that "canna-businesses" operating in a legal fashion should have all the same rights and services as any other business.
The second factor that led to Zarrad's entrepreneurial call was his experience as a former refugee. When the Soviet Union collapsed during his childhood, Zarrad, an Armenian, and his family had to flee Baku, Azerbaijan due to an ethnic cleansing campaign against Armenians. His family lived as refugees in Moscow for six years, where they were denied access to any and all basic financial and banking services. Later in adulthood, Zarrad was stationed in New Orleans, LA with the U.S. Marine Corps and had to evacuate during Hurricane Katrina. Once again, he was displaced and cut off from banking. Zarrad personally experienced what many only understand on a theoretical level. The unbanked and underbanked is not only an issue for refugees but also for low-income people in the U.S.
Thus, Zarrad began to view the current banking system as completely antiquated. Tokken's vision is to completely disrupt the banking system, starting with the cannabis industry and then by creating solutions for immigrants and anyone with cash-paying jobs. "We believe the future of banking can be conducted in a more decentralized way over mobile technology, as opposed to the masses being beholden to a handful of massive, centralized banks – particularly as we witnessed the repercussions of the economic collapse of 2009," says Zarrad. "We see this decentralization trend taking place in a variety of spheres such as ride share services, lodging services and more. We’re modifying ways in how risk is assessed based on data analytics and intelligence, as opposed to social stigmas, like many banks do. This is why Tokken focuses forward-thinking financial intuitions as potential partners."
So far, Tokken relies on word-of-mouth from end-users in order to grow organically. However the company is also working with PoS entities in the cannabis space to assimilate into a large swath of dispensaries and continue major growth. If all goes according to plan, Tokken could be onto something very powerful. The company could truly bring a completely new meaning to the adage, "getting high on success."