Is the Future of the Canadian Cannabis Industry Tied to Blockchain Technology?
The Cannabis Act of Canada
The passing of the Cannabis Act earlier this summer marks a turning point for the burgeoning recreational cannabis industry. As the legalization date of October 17 inches closer, sales figures for the cannabis market’s first year are already estimated in the billions. Canadian producers and consumers alike are looking to make the most of the opportunities that come as a new and popular market opens up. However, this is not your grandmother’s agribusiness.
In addition to the new legal frameworks and regulations, the Cannabis Act gives Health Canada the go-ahead to create a robust national tracking system for the entire cannabis industry – every step of the way from seedling to retail. This means that somewhere there will have to be a database tracking and storing industry transactions from the source plant to the shop shelf. If this sounds like a massive undertaking…it is.
The government argues that these measures are needed to monitor such a highly controlled substance and to prevent the cannabis industry from slipping into illegal markets. That being said, there are still questions to be answered about what form this database will take. Today, in the wake of mass data hacks and renewed emphasis on cybersecurity, one of the big questions on everyone’s mind is how will this cannabis-related data be protected? How much privacy are consumers entitled to? How transparent should the tracking system be? Is the technology we need already out there? Or is there room for competition from savvy tech start-ups and systems developers?
Blockchain Technology
The answer could lie in the history of cryptocurrencies like Bitcoin. Current coverage and commentary on the new cannabis market have highlighted blockchain technology (developed by Satoshi Nakamoto, founder of Bitcoin) as a force that could shape the future of the cannabis industry in Canada. Blockchain acts as a digital bookkeeping platform or leger that distributes itself publicly across several anonymous computers. Since blockchain-facilitated transactions don’t need a middleman, there’s a possibility they could minimize processing fees. They are also proofed 24/7 so they can offer nearly instantaneous service when processing transactions.
The big idea that makes this networked record-keeping strategy more secure is that in order to alter any record retroactively, a would-be hacker would also need to alter every subsequent link, or ‘block,’ in the chain. With a blockchain, there is no ‘mainframe’ or central authority to hack. The decentralized nature of blockchain and its many layers of verification and encryption make the technology highly resistant to tampering or hacking. Basically, it is as close to ‘set in stone’ as digital record keeping gets.
Blockchain technology has already seen successful implementation in both the private and public sectors. As mentioned in another recent Venbridge blog post, developers in diverse fields such as land tenure, and health and government services are exploring the potential of blockchain technology to record and transmit information. Even big banks have contributed to research initiatives into blockchain technology’s potential applications. Could blockchain be the right technology to help Health Canada monitor a newly legalized industry while still protecting the confidential records of cannabis consumers?
How likely is Health Canada to adopt blockchain technology?
While popular opinion seems to be generally optimistic around the future of blockchain in the cannabis industry, Health Canada has not yet embraced the technology. Official statements disclose that blockchain was considered as a possible solution, but that its use in government programs is still a ways away. The technology is still relatively new and regulators would like to see more established norms for its use in the government before they adopt the new technology more widely. Even though the cannabis tracking system won’t launch initially with blockchain in October, the tool could be incorporated into the system in the future. That said, another complication is that the rapid evolution of technologies like blockchain makes it difficult for legislation to keep up with the pace.
Blockchain for Cannabis Producers and Banks?
Even if the government isn’t ready to implement blockchain in its tracking systems, licensed Canadian cannabis producers are already implementing similar tools. Ontario-based WeedMD announced in March that they have made a strategic investment in ‘Blockstrain,’ a blockchain platform, becoming one of the first federally-licensed cannabis producers to incorporate blockchain technology into its systems. Other companies like PointChain are working on applications of blockchain technology to serve cannabis companies as well as the banks that manage their accounts.
Blockchain technology sure seems to be at the forefront of systems development where the cannabis industry is concerned, but whether or not we are likely to see widespread adoption of the tool remains to be seen. What’s clear at this point is that the success of the new cannabis market hinges on a yet-to-be-determined system that will link producers, consumers, and government regulators in a safe and secure way.
So, is the future of the Canadian cannabis industry linked to blockchain technology? It seems the answer is likely yes, but not just yet.
Visit venbridge.com for more details on non-dilutive venture debt, SR&ED Financing, and tax credit consulting services. Venbridge’s services allow you to maximize your government tax incentives, better manage cash flow, and invest more in the areas you need. If you’re a blockchain startup, give us a call and we can help you with your SR&ED filing!
Venbridge
+1–833- 386–3632
https://www.cbc.ca/news/politics/bitcoin-cannabis-pot-blockchain-parliament-1.4756492
