Conflicting federal and state marijuana laws put financial institutions and regulators in “a very difficult position,” the U.S.’s top central banking official said on Tuesday.
During a Senate Finance Committee hearing, Sen. Bob Menendez (D-NJ) asked Federal Reserve Chairman Jerome Powell whether banks “need clarity” on how to deal with cannabis businesses in legalized states.
“I think it would be great to have clarity,” Powell said. “Financial institutions and their regulators and supervisors are in a very difficult position here with marijuana being illegal under federal law and legal under a growing number of state laws.”
“It puts financial institutions in a very difficult place. It puts supervisors in a difficult place too,” he said. “It would be nice to have clarity on that supervisory relationship.”
Providing insurance coverage for marijuana businesses is another area where banks and supervisors could use some clarity, he said in response to a follow up question.
Powell made similar remarks at a news conference last year, saying that while the reserve’s “mandate has nothing to do with marijuana,” it would be helpful to get clarity from Congress on the issue.
Treasury Secretary Steven Mnuchin has also emphasized the need for federal reform so that cannabis businesses don’t have to operate on a cash-only basis. He said that addressing banking concerns in the marijuana industry was at the “top of the list” of his department’s concerns.
But this year, it seems they might get their wish. The first marijuana-related hearing of the 116th Congress concerned banking issues for state-legal cannabis businesses, and witnesses representing financial institutions urged members of a subcommittee to pass legislation that shields banks that service marijuana companies from federal penalties.
Almost 100 cannabis businesses submitted written testimony to the subcommittee as well, expressing their desire for banking reform.
“The absence of a broader, permanent regulatory framework continues to keep nearly all banks out of this growing industry despite a clear interest,” Rep. Gregory Meeks (D-NY), chair of the Consumer Protection and Financial Institutions Subcommittee, said at the opening of that hearing this month.
A bipartisan bill authored by Reps. Ed Perlmutter (D-CO), Denny Heck (D-WA), Steve Stivers (R-OH) and Warren Davidson (R-OH) would ensure that cannabis businesses could legally store their profits in banks.
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