Hemp farmers will be glad to learn that one of the biggest issues affecting the hemp industry, lack of access to proper banking services, will soon be a thing of the past. The industry grew rapidly after the 2018 Farm Bill legalized the cultivation of industrial hemp, giving farmers the green light to grow the lucrative cash crop under state and tribal programs. However, banks avoided working with hemp producers, denying them crucial services like loans.
Well, that’s about to change. According to statements from federal and state bank regulators, banks will no longer be required to file reams of paperwork to anti-money laundering authorities whenever they transact with hemp producers. Erica McBride Stark, Executive Director of the National Hemp Association, a trade group for hemp growers, says that banking has been an ongoing problem, but this development could be quite helpful for the sector.
Hemp is an insanely versatile crop, said to have hundreds, if not thousands of uses. Although it is quite similar to marijuana, hemp has drastically reduced levels of THC (delta-9 tetrahydrocannabinol), the psychoactive compound responsible for the ‘high’ cannabis is famous for. According to the Farm Bill, for cannabis to be considered legal industrial hemp, it has to have less than 0.3% THC content.
You would think that banks would be fine with working with farmers who could prove that their product was legal, but that wasn’t the case. “They understood that hemp was removed from the federal Controlled Substances Act but because of the paperwork that was involved, a lot of them were just like, yeah, it’s just not worth it,” says Stark.
Her organization, a non-profit that doesn’t even grow hemp but advocates for hemp farmers, was also denied basic banking services by banks who thought it’d be easier to wash their hands of the matter and observe from afar.
But apparently, there has been a lot of interest in hemp in the banking sector, and for good reason too. According to Rob Nichols, the President of the American Bankers Association, a lot of banks have been pushing for change. A survey of 1,800 agriculture-focused banks in the country found that almost half of them had been asked by their farmer customers whether the banks would still do business with them if they started growing hemp.
“We appreciate the steps regulators have taken today to clarify the regulatory expectations for banks, and we look forward to working with them as they develop additional guidance,” says Nichols.
Experts expect the entire hemp industry, including players like Sugarmade Inc. (OTCQB: SGMD), to be ecstatic now that the headaches associated with banking are now going to ease up a great deal.
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