California Proposes a Cannabis Bank

Authored By: Jonathan Storper

California is working on a state cannabis banking law. California Senate Bill 930, now winding its way through the legislature, would create the Cannabis Limited Charter Banking and Credit Union Law, to be administered by the Commissioner of Business Oversight and the Department of Business Oversight. The bill would create the Cannabis Limited Charter Bank and Credit Union Advisory Board and specify its composition, to include the Treasurer, the Controller, and the Chief of the Bureau of Cannabis Control, which would be responsible for ensuring that this law functions in a safe and efficient way. The Advisory Board would be responsible for reviewing department enforcement reports, holding meetings that would be open to public comment, and issuing its own recommendations, which would be submitted to the Legislature and the Governor, and would also be required to provide guidance on specified investment activities.

Cannabis banks and credit unions would be permitted to provide limited banking services to cannabis businesses. The bill would require a licensee to comply with all requirements in the Financial Institutions Law, and to be licensed pursuant to either the Banking Law or the California Credit Union Law, as applicable, except to the extent that any requirement of those laws are inconsistent with a provision of the Cannabis Limited Charter Banking and Credit Union Law. By expanding the application of the California Credit Union Law, a willful violation of which is a crime, the bill would impose a state-mandated local program.

A cannabis bank or credit union could issue to an account holder special purpose checks that would be valid for only specified purposes. The bank or credit union could cash the checks it has issued, including those presented by parties that are not account holders. The bill would permit these checks to be used for the payment of state and local fees and taxes, payment of rent on property leased by, or on behalf of, the account holder’s cannabis business, payment of vendors physically located in California, and the purchase of state and local bonds. However, a person or entity would not be required to accept these checks. A cannabis bank could charge fees for its banking services, and form a banking network of other banks, subject to the approval of the commissioner, to facilitate the provision of cannabis banking services. If the bill becomes law, emergency regulations will be adopted and licenses for these purposes may begin issuing as soon as July 1, 2019. Governor Brown has not indicated if he will sign the bill into law as yet.

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