Let's face it: US midterm elections are passable. Although voting is important, a sizable chunk of the electorate always disappears during nonpresidential races – a reality since the 1840s. In other words, when the role of commander in chief is not on the table, many folks go silent.
Sometimes, though, election candidates do interesting things, attracting a buzz to the midterm slump. This time around, Zach Conine, Nevada's Democratic hopeful for treasurer, seeks to expand the role of the state's chief custodian, a position that many – not just residents of Nevada – have questioned the relevance of.
Although Conine hopes to bring his experiences as an entrepreneur and an investor to public office to help create "a brighter future" for Nevada, a certainly admirable mission in itself, that is not the most interesting facet of the candidate's platform.
The answer comes in two key words: blockchain and weed. Conine recently shared a white paper with ETHNews outlining a statewide "legal marijuana banking solution" that would be powered by blockchain technology.
To those unfamiliar with the legal cannabis space, there is a large and apparent issue: a lack of conventional banking support. Because the cultivation, distribution, sale, and consumption of the drug is illegal at the federal level, banks backed by the Federal Deposit Insurance Corporation (just about every conventional bank or credit union one could imagine, including big names like Wells Fargo, Bank of America, and Capital One) cannot offer financial services to, or otherwise support, legal cannabis businesses in Nevada. As such, dispensaries, producers, and other cannabis-based businesses must operate on a cash basis.
A proposal spearheaded by Conine and Kate Marshall, former Nevada state treasurer and current Democratic candidate for lieutenant governor, addresses this lack of banking support. The proposed model, which is currently in draft state, would create a kind of credit system, allowing cannabis customers and businesses in Nevada to make intrastate transactions using Chits (essentially tokens). These Chits – which, Conine explained to ETHNews, would not be a form of cryptocurrency but merely a representation of value within the system – would be tied to the US dollar and managed by the state. (There would be no finite amount of tokens, unlike, say, bitcoin.)
To obtain Chits, an individual would go to what Conine and Marshall call a Chit Dispersal Machine (CDM), an ATM-like machine owned by the state, and pay for the number of Chits desired. These CDMs, probably located in dispensary lobbies, would provide a customer with a secure "gift card," so to speak, with the Chits loaded onto it. Individuals could enter a dispensary's sales area, for example, and use their cards to purchase cannabis products. Also like an ATM, the system might assess a fee to convert the dollars into Chits, but Conine said this fee could end up being charged to the dispensary operating the CDM or "some other location that's part of the funding model," not necessarily the customer.
Businesses could then go through the state to convert the Chits they received back into cash, or they might choose to use the Chits to directly pay vendors, or even employees, who would accept them as a form of payment.
Conine mentioned the example of an edible production company selling its brownies and cookies to a dispensary, receiving Chits in return. That company would need to pay its rent, so it could either redeem the Chits for cash from the state to make the payment, or it could directly pay its landlord in Chits if that entity were registered with the system and chose to accept them. Either way, the Chits would eventually be converted into cash.
Underlying this entire model would be a blockchain, likely permissioned, tracking the Chit transactions, allowing both customers and companies connected to the chain to view the contents of its ledger. In this way, on top of providing a banking alternative through Chits, the system would allow participants in the legal cannabis industry to have a sense of data security and the ability to reliably track commerce.
Conine conceded that a customer could choose not to register with the system, meaning any transactions made with that individual's card would not be tracked by the blockchain ledger. This choice might be informed by a customer's hesitance to provide personal information that would be registered to the blockchain, such as address, contact information, and email. One of the incentives to register, though, is that the Chits could be replaced should an individual lose the card.
Despite the possibility of not registering, Conine believes there is only "a relatively small group of people" that would acquire Chit cards and not register them. Customers would still have the option to pay in cash, so if they wanted to circumvent the system, they could do so that way.
From Proposal to Policy
From a policy perspective, there would be a bit of legwork to implement this blockchain-based system if Conine is elected. Although there are a few paths he could take to make the proposal a reality, he noted that the most likely route would involve the state's legislature and the legislative process.
"We would work with one of a number of potential Assembly or Senate sponsors to sponsor the creation of this system through a BDR, which is a bill draft request," said Conine. "We think, based on our initial conversations, that there are a number of legislators in the Assembly and the Senate who would be interested in using one of their finite BDRs for this [purpose]."
In Nevada, legislators are assigned a certain number of BDRs that they can use to introduce legislation, which, like in most other state legislatures, will then be discussed and generally voted on (unless a bill dies in committee). As Conine mentioned, a senator or assemblyperson would need to decide to use a BDR to propose the creation of a blockchain-based cannabis banking system. Although it may not seem like it on a surface level, securing bill sponsorship can be tricky because of the various interest groups and stakeholders that seek out legislators to sponsor their proposals.
In any case, Conine sees the potential of blockchain technology for other industries within Nevada. For instance, a lot of processes at the state level require manual updating of information that may not be in real time. With a blockchain-based ledger, though, those updates could occur more efficiently.
He also pointed to Nevada's history of technological progress – the state tends to get "involved in technologies and ideas that are a little bit ahead of their time." Besides heavy hitters like Tesla, Google, and Switch all having offices in northern Nevada, the Silver State serves as home base to a handful of blockchain initiatives as well. (Disclosure: ETHNews is an editorially independent division of Blockchains Management Inc., which is based in Nevada.)
Speaking about this trend of tech innovation, Conine elaborated, "I expect we'll continue to look for best-of-breed possibilities and implement them." He also noted that the state "could be on the forefront of the use of" technologies like blockchain "to make our data more secure, make our processes more efficient, and, in general, be a better steward of people's money."
The two candidates' proposal is a work in progress, already having undergone various changes, but Conine believes the lack of banking support for Nevada's legal cannabis industry is ultimately "a big problem worthy of solving." Besides the financial ramifications associated with the banking issue, he believes there are also public safety concerns to consider (robberies are not unheard of at dispensaries). Accordingly, if he were elected, he would want to act sooner rather than later to address the problem:
"We believe there is a clear and present danger as it relates to some of the public safety issues [surrounding legal cannabis], so we're looking to put a solution in place as soon as humanly possible."