Square Inc. has started an invite-only payments pilot program for certain cannabidiol products, a company spokesperson said in an email.
Cannabidiol, or CBD, does not cause a high and is often sold as a dietary supplement or included in creams and other personal care products. The most recent Farm Bill reauthorization legalized hemp and by extension hemp-based CBD.
Square's move to test accepting payments for CBD is one of the earliest signs of the cannabis industry gaining acceptance beyond the cash economy. Because cannabis is still considered a narcotic under federal rules, banking and financial services for firms providing those products, including maintaining bank accounts and processing payments, has been off limits.
After hemp was legalized in late 2018, Square was asked on Twitter if it would start accepting payments for hemp and CBD products. "Unfortunately, Square is currently unable to support the sale of these products," the company said at the time.
The spokesperson declined to elaborate on when the beta project began. When asked about the impetus for launching the program after previously declining to work with CBD companies, the spokesperson declined to comment.
Compass Point analyst Isaac Boltansky said Square's pilot is a positive development for the CBD industry. Square's entry into the burgeoning market comes as federal legislation that would allow marijuana businesses broader access to financial services is gaining momentum in Congress.
In March, the House Financial Services Committee voted 45-15 to approve a bill to provide safe harbor for banks offering services for cannabis-related businesses. Some senators have signed on to a companion Senate bill, but the Senate Banking Committee's chairman, Sen. Mike Crapo, R-Idaho, has so far refused to hold a hearing about the proposal. He recently put the onus on the U.S. Justice Department to overhaul cannabis rules before Congress considers a measure that would provide relief to banks.
On May 20, all 50 state banking trade associations sent a letter to Crapo requesting hearings on the merits of providing cannabis-related businesses access to banking services.
"As a result of congressional inaction and the lack of regulatory clarity, legal cannabis businesses must operate on an all-cash basis, subjecting their employees and the general public to serious risk of criminal activity and harm," the letter said.
"Beyond [Square's] development, we remain bullish on the prospects for cannabis banking legislation in this Congress," Boltansky said in a May 23 note.
