Big news from the Federal Reserve this week.
As new Fed Chairman Jerome Powell was taking his seat at the head of America’s central bank amid a major market correction, a big decision in favor of the marijuana industry was buried in all the noise.
Turns out the Fed just greenlit a new marijuana business.
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The Federal Reserve approved a master account for Fourth Corner Credit Union, a new Colorado-based financial institution that will cater specifically to cannabis-related companies.
It’s been a long road for Fourth Corner. In total, the firm had to lobby the Fed for some 40 months before finally getting approval for a master account, the tie-in to the Federal Reserve that banks need to operate.
The Federal Reserve Bank of Kansas City had barred Fourth Corner from getting a master account, but a federal judge overturned the order, forcing the Fed to greenlight the credit union’s status.
Some concessions had to be made. While Fourth Corner had hoped to provide much-needed banking services to dispensaries in Colorado, the credit union won’t be able to serve plant-touching businesses.
At least for now.
Instead, it will cater to companies that provide ancillary services to the legal pot industry. Businesses that have had trouble opening accounts at mainstream financial institutions due to federal banking regulations.
Mark Mason, an attorney for Fourth Corner, was quoted in The Wall Street Journal:
“It’s been the mission of the Fourth Corner Credit Union to bring about fully legal banking to the marijuana industry. But there are many ancillary businesses that have trouble getting bank accounts because they do business with marijuana.”
The move represents the first time ever the Fed has acknowledged the legality of banking for the cannabis industry.
And ancillary businesses represent a major subsector of the marijuana industry. The Fed’s unprecedented approval of Fourth Corner is a major victory for the pot industry.
Speaking to Marijuana Business Daily, Mark Goldfogel, executive VP of industry relations at Fourth Corner, notes:
“We feel vindicated. We feel like we’ve been heard. We feel like we’ve been able to accomplish an awful lot of education.”
The move could also set precedent for traditional banks looking to jump into the marijuana biz.
John Vardaman, executive vice president for Hypur, an Arizona-based payment and banking technology company, notes in Marijuana Business Daily:
“If a bank or a credit union is looking for a signal, this is a positive one. This is a visible crack in the wall surrounding marijuana business banking.”
Up next, Fourth Corner will need to get deposit insurance before it can open for business. The firm received approval from Colorado state regulators back in 2014.
There’s still a long way to go before we see full-blown federal approval of banking for every corner of the cannabis industry.
But this week’s news from Colorado is an important first step.
It could help drive upside in pick-and-shovel-type ancillary businesses that support the legal pot market.
I’ll continue to keep a close eye on this emerging trend. More to come as the story develops.
This article originally appeared on The Daily Reckoning.