As Prepared for Delivery on June 14, 2022
Thank you very much for that kind introduction and welcome. It’s my pleasure to join you today, not only for the chance to visit with a number of old friends and acquaintances, but also because this mountain weather is a welcome reprieve from the summer heat and humidity of the east coast, where I spend most of my time.
But I’m also pleased to be here because it gives us an opportunity to focus in greater detail on an important issue that is at the forefront of all of our minds, which is the need to reform our banking laws to accommodate the change in legal status of cannabis and marijuana businesses in the United States.
I’m going to assume that, since we’re at a Cannabis Banking Symposium, we’re all familiar with the key arguments in favor of harmonizing banking laws and regulations for marijuana-related businesses. If you all weren’t already familiar with those issues, you wouldn’t be here today. Moreover, I will assume that we are all in general agreement that the time has some for reform. So in the interest of time, I will simply reiterate my basic position that it is time for federal action to clarify and harmonize the laws and regulations surrounding the state-legal cannabis industry and marijuana-related businesses, so that this industry can take part in the legitimate financial services industry.
Last August, I spoke on this issue to make the case for cannabis banking reform. I’ve spoken on this issue repeatedly since last summer, and in fact this is the second group I’ve addressed on this question in just the past few weeks.
That speech last summer got quite a bit of attention, as it’s somewhat unusual for a federal financial regulator to be so forthright in calling for action from the legislative branch. Some of the news coverage was perhaps a little over-heated – I recall one headline that said something along the lines of “Financial regulator slams Congress over marijuana action.” I really didn’t intend to “slam” Congress, so much as offer constructive criticism and a spur to action, but maybe that’s a matter of interpretation.
Regardless, it’s almost a year since I planted my flag, so to speak, yet in that time, there’s been, unfortunately, little measurable movement on this issue at the federal level.
Frankly, I find that discouraging. Of course, I well understand how the wheels of legislative change tend to move rather slowly. I’m not a stranger to the legislative process, having worked in and around government for much of the last 30 years.
But this is one of those times when the way forward seems rather clear, so it’s understandable if there’s disappointment or frustration with the slow pace of progress.
However, with that said, I would like to take a moment here to note that “slow progress,” does not mean “no progress.” And in fact, we should recognize that there have been some encouraging signs.
First, in February the House of Representatives passed the Secure and Fair Enforcement (SAFE) Banking Act to normalize banking activities for cannabis businesses. I don’t usually opine on pending legislation, but the SAFE Banking Act seems like a good place to start in addressing this problem. On top of that, I know that bill has substantial support from a number of leaders in both the cannabis and financial services industries. Of course, it’s not the first time the House has passed this legislation, and it still needs to pass the Senate. But if nothing else, House passage is a necessary first step, so let’s take it as a positive sign.
Going beyond Washington, D.C., we can also point to reassuring progress in state capitols around the nation, where policymakers and regulators are moving forward to address the banking and tax status of cannabis businesses.
For instance, just last week lawmakers in Pennsylvania moved forward with a bipartisan legislative proposal to allow medical marijuana providers to deduct business expenses on their tax returns. I understand the Senate in Pennsylvania also passed legislation to allow medical marijuana businesses to access the financial services system, though that’s awaiting further action. We’ve seen similar legislative movement in New York and Washington state, and I’m sure there are probably others.
That’s only one piece of the puzzle, but at least it illustrates that someone is focused on the right problem. One might wish the most constructive efforts weren’t happening at the state level, since that runs the risk of creating a patchwork of reforms when we need the clarity and coherence of an over-arching federal solution. But we should absolutely commend these state officials are working to address this issue in the absence of Congressional action. My hope is that these reform efforts at the state level may act as a spur to federal action.
Likewise, the community of federal executive branch regulators is trying to be proactive so we can be prepared to take action when Congress does pass some form of legislation. The NCUA, for example, has an internal working group focused on preparing for what we’ll need to do to respond when the time comes. We’re also planning an NCUA roundtable for examiners and industry leaders to share information and discuss key challenges related to doing business with MRBs, so be on the look-out for that.
Honestly, I wish we could do more, but while we await Congressional action on legislation, we are limited in what we can achieve. I have suggested we establish an interagency working group among federal financial regulatory agencies so that the various regulatory entities can have a clear channel for communicating and coordinating our actions. That would be a significant step forward in terms of harmonizing our efforts across the executive branch. My hope is that in the near future we’ll have momentum on that front.
Another reassuring sign is that we’ve witnessed a tremendous shift in terms of leading policymakers addressing this issue with greater clarity. It was certainly a help last December when Treasury Secretary Janet Yellen told Congress that banking reform for marijuana-related businesses would be beneficial (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) , as it would allow for more efficient tax collection from this growing industry. Just last week, the U.S. Conference of Mayors passed a resolution urging Congress (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) to address the marijuana banking issue. So we’re seeing more policymakers stepping forward with a highly reasonable and pragmatic approach to the issue, which we should all welcome.
At the same time, growing media attention is a great help. A recent article in Politico covered the rise in crime (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) targeting cash-based cannabis businesses, reflecting the need for urgent legislative action. I was pleased to see a prominent D.C.-based publication, one that many in the political and legislative classes pay close attention to, digging into this issue. Other leading mainstream publications that set the agenda, like the Washington Post, the New York Times and Wall Street Journal, have also covered the issue, and I certainly hope they’ll continue to do so.
‘An Untenable Situation’
So if we take all of that evidence together, it truly does point toward real momentum in terms of growing public awareness. That momentum and awareness is absolutely necessary. However, it is not sufficient.
We still need Congressional action, and we need that federal solution because the existing situation is untenable. Here we have a rising industry that is rapidly growing – estimated at $30 billion this year alone -- and will only continue to grow. And yet the basic commercial banking infrastructure needed to provide financial services to this industry is virtually non-existent.
I’ll point you toward the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, which published their Marijuana Banking Update (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) not long ago. As of September of last year, that report shows 553 banks and 202 credit unions providing services to marijuana-related businesses, in accordance with FinCEN’s 2014 guidelines. As you all are aware, those guidelines provide the only legitimate way, at least right now, for cannabis businesses to secure depository accounts with financial institutions.
The number of financial service providers working with cannabis businesses has increased – slowly, but there’s been growth. Still, if we put those numbers into a fuller context we can see how insufficient it is. My agency, the NCUA, regulates and insures the nation’s credit unions, which includes almost 5,000 institutions. Yet, just over 200 of those are providing services to one of the fastest-growing industries in the nation.
We should not be satisfied with that – as I said, it’s simply untenable. Which is why events like this are such a great benefit, because we need these forums where we can bring people together to talk about how to keep the momentum going.
So I’m asked regularly by industry leaders, what should we be doing with regard to cannabis banking? First of all, I would encourage you to continue looking forward. Events like this are a big help, because I believe it’s important that we “normalize” talking about these kinds of issues in a straightforward way.
One thing I note in my talks on this issue is that in my previous tenure on the NCUA, back in 2005-2009, I probably wouldn’t have bothered to speak to an event about marijuana legalization and financial services, and for that matter I probably wouldn’t have been invited. So the fact that we’re having discussions now is a testament to the remarkable pace of change.
Moreover, I’ve been impressed with the efforts I’ve seen from NASCUS and other leading industry associations in terms of your educational efforts and advocacy, and would encourage to keep up the good work. I also encourage you to step up your efforts to talk with and work with leaders in the cannabis industry, if you’re not already doing so. It might even be constructive to coordinate your meetings and events with some of the leading industry advocates, to further deepen the relationships and develop a shared sense of purpose on what needs to be done.
One thing I emphasize when I talk about this issue is that I have no particular personal or professional investment in the debate over marijuana legalization or the rise of the industry surrounding legalized marijuana. I’m not a cannabis user, and I have no financial interest in the industry.
Moreover, as I noted, it’s unusual for a regulator to take such a forthright position on legislative matters – typically, regulators prefer to focus on applying statutes as written, and perhaps offer some advice and expertise to lawmakers when asked. In fact, I’ve even been warned not to go quite so far, which is advice that isn’t always easy for me to take! It might have been a lot easier for me to simply remain on the sidelines and wait for Congress to act, one day.
But I would say that the writing on the wall is clear, and that while full legalization of cannabis at the federal level has not happened, we should see it as a foregone conclusion. It’s no longer a question of “if,” but “when.” And I believe that if that’s the case, policymakers and leaders have a responsibility to face up that reality and provide the leadership and guidance that’s needed to put this industry on a legal footing with regard to financial services. At this point, regulators are doing that, and in fact, many members of Congress are doing that. But what needs to follow is definitive action.
Since I’ve started talking about this over the last year, I’ve been pleasantly surprised by the positive reaction. Financial services leaders, state regulators, people in the cannabis industry – people thank me for taking a strong stance on this issue.
I appreciate that reaction, and I even find it gratifying, but I’m truly not fishing for praise here. There’s an old line from President Ronald Reagan that I like a lot, one I’m sure you’ve heard: “There is no limit to the amount of good you can do if you don’t care who gets the credit.” That’s sage advice, and pertinent to our mission here. In this case, our job is to focus on the task at hand and find ways to work together to continue generating the needed momentum. Getting the job done – through full Congressional legislative action normalizing banking services for the growing cannabis industry – should be more than enough credit for all of us. Thank you very much.