At CannaGather, a cannabis industry event held in New York City this week, New York Representative Carolyn Maloney expressed her optimism about the Secure And Fair Enforcement (or SAFE) Banking Act being approved in the House. Notably, the SAFE Banking Act aims to provide banking access to the rapidly growing cannabis industry.
According to an August 22 Forbes report, Maloney said at CannaGather, “It’s really one of the most interesting pieces of legislation to watch.” She added, “I believe it will pass in the House this year.”
In another favorable development for the cannabis sector this week, credit unions are now permitted to offer banking services to hemp businesses.
Credit unions can bank with hemp companies
On August 19, the National Credit Union Administration (or NCUA) announced that federally insured credit unions might offer certain financial services to legal hemp businesses. This move comes as the 2018 Farm Bill federally legalized the hemp crop and its derivatives.
The NCUA’s interim guidance stated, “Some credit unions have lawfully operating hemp businesses within their fields of membership. Businesses dealing with hemp and hemp-derived products include manufacturing, distribution, shipping, and retail, among others. With recent changes in federal law, more hemp-related businesses may be founded, and existing ones may expand.”
SAFE Banking Act to support cannabis companies
The cannabis industry—including major players such as Canopy Growth (WEED) (CGC), Aurora Cannabis (ACB), and Aphria (APHA)—is estimated to grow into a multibillion-dollar industry. According to a May 2019 report by Grand View Research, the global legal marijuana market is expected to touch $66.3 billion by the end of 2025.
There is plenty of room for these companies to expand further as more states contemplate legalizing medical and recreational marijuana. Currently, 33 US states and Washington, DC, have legalized medical marijuana. Also, the recreational cannabis market exists in 10 states and the District of Columbia.
The SAFE Banking Act aims to prevent federal regulators from penalizing banks for providing financial services to cannabis companies, as cannabis is still not legalized at the federal level. On July 23, the Senate held a hearing on the SAFE Banking Act. Notably, the SAFE Banking Act has 31 cosponsors in the Senate and 206 cosponsors in the House of Representatives.
Access to banking services would benefit cannabis companies. This access would facilitate their expansion plans, including increasing production capacity, supply chain expansion, and international growth. The banking system would see a massive cash infusion from the cannabis industry. Plus, this bill could help reduce instances of money laundering in the sector.
Recent expansion moves
Major cannabis companies are investing heavily in their strategic expansion plans, including organic growth and strategic acquisitions. Aphria has been investing in the expansion of its production capacity. Notably, it is awaiting Health Canada’s approval for its Aphria Diamond facility. To learn more about Aphria’s expansion plans, please read Aphria’s Strategic Growth Initiatives Drive APHA Stock.
Canopy Growth recently announced that it received an extraction license from Health Canada for its KeyLeaf Life Sciences facility. This license is expected to increase the company’s production capacity.
On August 19, Aurora Cannabis announced its acquisition of Hempco Food and Fiber. This acquisition would help Aurora expand its presence in the hemp market.
If the SAFE Banking Act is passed, then banks would be able to support the expansion plans of cannabis companies and help them address the growing global demand.
On August 22, stock prices of Aurora Cannabis and Aphria were up 13.7% and 10.2%, respectively, year-to-date. On the other hand, Canopy Growth stock was down 8.5% YTD on the day.