Federal Reserve Bank In California Begins Accepting Cannabis Cash

Getting a cannabis cash into a Federal Reserve has been like finding the holy grail. In Colorado, credit unions have sued in order to be able to establish a master account, which is the key to cannabis banking. This past summer, the Fourth Corner Credit Union won a partial victory when a court said that the Federal Bank of Kansas City couldn’t block access.

Apparently, while that was happening in Colorado, HARDCAR Security found the grail in the state of California. The company has been secretly working in a pilot program for the last four to five months covering some the largest cannabis accounts in California. HARDCAR has been depositing the money in both the Federal Bank of San Francisco and the branch in Los Angeles. “No one else has been able to get into the Fed in California,” said HARDCAR Security CEO Todd Kleparis.

A bank sponsored HARDCAR with the Federal Reserve and all of its guards go through federal background checks. “We bring the money to their locations and they go through it,” said Kleperis. “Our company has moved over $25 million in a few short months.” The most important piece of this banking puzzle is that the cannabis company money is now co-mingled with regular money. It legitimizes the cash and allows it to enter into the monetary system.

Cities Also Need Help With Cannabis Cash

In addition to picking up the cannabis business money and depositing it with the bank, HARDCAR said it is also going to be assisting cities with the movement of their cannabis cash. “No other armored car company wants to take the cannabis cash,” said Kelperis, “This risk is too much. Think about all those grow sites in Desert Hot Springs. Who is going to go get it? We’re going to go to the cities and help them put all these tax revenues in the bank.”

Most of the focus on solving the cannabis banking problem has been on the plant touching businesses, but it also turns out that the municipalities were finding that their banks wanted nothing to do with the cannabis tax revenues. Kleperis mentioned that Los Angeles contemplated setting up its own bank, but that it would take years to establish. He also believes that by getting access to the Federal Reserve system, it will keep more of the money in the state and put more money back into the system. There are many stories of “backyard banks” where farmers bury cash because they have no way to bank it and worry about robberies.

HARDCAR is a company filled with military veterans and that may have made the decision for the Federal Reserve to accept cannabis cash as little easier. Or it could be that the California cannabis market will dwarf the Colorado market and that much cash floating around the state would make for a dangerous situation. Either way, it’s a huge step forward for cannabis banking and the mainstreaming of the industry’s money. Kleperis added, “It’s a huge win.”

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


27 comments

  • Avatar
    Teresa Nichols

    November 15, 2017 at 1:04 am

    With the Federal Reserve accepting money in a federal bank with money from Cannabis that has been mixed with money from other businesses explain how that police and their dogs can smell marijuana and charge at pedestrian in other states. This happens in states where legalization medically or recreationally have not happened yet like the state of Georgia. Police dogs smell money if that money has a smell of cannabis or drugs on it the money is confiscated and the person is tooken to jail. This leaves room for lawsuits there’s no way they can use this lot of smelling money now that this has happened with the Federal Reserve. Thank you and God bless

    Reply

    • Avatar
      Justin Nahin

      August 17, 2018 at 10:31 pm

      Okay, here is a solution to that problem. Make it illegal for marijuana dispensaries to accept cash. They must all accept money through digital forms of payment and I am not talking credit card. Closed loop debit card and bank account payment systems. This is what my company Indospace.io is doing. There are plenty of other solutions out there as well.

      Reply

  • Avatar
    Mark Roest

    November 15, 2017 at 4:00 pm

    It might be possible for really good lawyers to make that case, but it’s iffy because there is no law making it legal in Georgia, and the Feds still say it’s against the law.
    Also, I wonder if part of the reason the Fed is accepting this money (with thorough controls in place) is to reduce the momentum behind the public bank movement.

    Reply

    • Debra Borchardt
      Debra Borchardt

      November 15, 2017 at 5:31 pm

      I think the reason they decided to accept the money in California is that the tremendously large amounts of money make life extremely dangerous for these businesses. Even the cities were worried about collecting taxes from cannabis businesses. How exactly would they protect their employees when there are piles of cash to process. I believe it was a safety issue.

      Reply

  • Avatar
    Michael Jerome

    November 16, 2017 at 6:17 pm

    Debra,

    There’s some misunderstanding about the cannabis currency processing business in your article. Blue Line Protection Group has been providing currency pick up, processing and delivery to the Federal Reserve services for over a year now. Blue Line works with multiple financial institutions who provide transparent and legitimate banking services to their clients. Blue Line’s on track to pick up and process $500 million over the next 12 months for the legal cannabis industry in Colorado alone… and that’s slated to go to the Federal Reserve.

    Reply

  • Avatar
    Derek Taylor

    December 30, 2017 at 4:15 pm

    Great article. Thanks for pulling this information together. Are there any California Credit Unions and or banks accepting cannabis business deposits? Any sense of when to expect updates on the federal reserves “pilot program”?

    Reply

    • Debra Borchardt
      Debra Borchardt

      January 2, 2018 at 7:54 am

      I believe there are credit unions in CA working with cannabis companies. I haven’t heard any more from HardCar but I can follow up.

      Reply

      • Avatar
        Kevin

        March 21, 2018 at 4:15 pm

        Would love to know which federal reserve bank accepts cannabis cash, as the headline states

        Reply

      • Avatar
        Shane Terry

        April 2, 2018 at 7:55 pm

        Every now and then FinCen will release a report on the number of marijuana related accounts that are remaining open and filing SARs nationwide. I’m sure 99% of the industry would be very interested in knowing which banks are allowing (even for a short period) MJ accounts in each state. Probably a stretch to find out all the info, but we’ll start with CA! Unless you want to float some info to those of us in NV… Good article, its definitely a significant shift for the industry

        Reply

  • Avatar
    Kenny Tolbert

    January 11, 2018 at 3:40 pm

    Great article! We really need any credit unions that are presently working with cannabis companies. Please let us know. Thanks

    Reply

  • Avatar
    James

    April 16, 2018 at 12:42 pm

    I wish it was the same thing for Colorado.

    Reply

  • Avatar
    Rorschached99

    May 4, 2018 at 12:03 am

    This is a problem crypto-currency would solve.

    Reply

  • Avatar
    dave allen

    June 1, 2018 at 10:59 pm

    Crypto Currencies are regulated by the SEC, which is a Federal agency

    Reply

  • Avatar
    Jon Drucker

    August 1, 2018 at 11:28 pm

    I have been told that there are five credit unions in California banking cannabis:
    Technicolor in Burbank,
    Rancho in Downey and
    Santa Cruz in Santa Cruz.
    If anyone knows the other two, or any others open to it, please reply here.

    Reply

      • Debra Borchardt
        Debra Borchardt

        October 26, 2018 at 8:37 am

        Hi Jeffrey,
        I was given this information by the company moving the cash. I did not actually open an account.

        Reply

    • Avatar
      Ca banked

      December 23, 2018 at 9:31 am

      Safe harbor private and north bay Cu.

      Reply

    • Avatar
      Ca banked

      December 23, 2018 at 9:32 am

      Also technology in San Jose. And there’s more but small quantity of accounts .

      Reply

      • Avatar
        Tim Olson

        May 21, 2019 at 6:08 pm

        Thanks for the suggestions. Do you have a list of other banks/cu’s in California that bank cannabis?

        Reply

  • Avatar
    Robert Bows

    August 20, 2018 at 4:55 pm

    Debra, thanks for the excellent article. As a founding board member of the Public Banking Institute and Colorado Public Banking, I am interested in a few more details. When these deposits are made in federal banks, are these made directly into the accounts for the cannabis companies, or is there some umbrella account that handles the distribution of debits? Also, if the cannabis companies have their own accounts, can they write checks to from these accounts to businesses and individuals in other states?

    Reply

  • Avatar
    Bob Elliott

    August 27, 2018 at 12:35 pm

    How is it possible that the Fed can accept cannabis money while federally chartered banks cannot? Does this make any sense to anyone? I wonder if the author contacted the Fed and spoke directly with a senior Fed employee as diligence to determine if any of this is true?

    Reply

    • Debra Borchardt
      Debra Borchardt

      August 27, 2018 at 4:33 pm

      Each Federal Reserve Bank is run by a different person who can make these decisions. This explains why a Kansas City Fed Reserve Bank won’t accept this type of money, but one based in San Francisco can make the decision to accept it. The banks are separate companies and they make their own decisions. So, a Fed Reserve in SF can say yes it will accept that cash, but Bank of America can say no.

      Reply

  • Avatar
    Jennifer Smith

    December 30, 2018 at 3:09 am

    Wow this is a good news! Now we speak business.

    Reply

  • Avatar
    Karen Page

    January 4, 2019 at 2:22 am

    I like to see cannabis cash! Great news!

    Reply

  • Avatar
    Kevin Murphy

    July 12, 2019 at 3:46 am

    Thank you for this article I really enjoy reading this article I have learned a lot while reading the comments about this article and that found the ideas on how to solve this issue.

    Reply

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