Legislators gathered on Wednesday afternoon to hold a public hearing on a measure that would prohibit cannabis firms in the state of Washington from working with bitcoin.

CoinDesk reported last week that SB 5264, a bill presented by two Washington state senators, would ban businesses working in the marijuana industry from both selling products for bitcoin as well as purchasing them with the digital currency. At the time, primary sponsor Sen. Ann Rivers said that the measure was intended to boost financial transparency to the state’s cannabis sector as part of an effort to “help move it out of the shadows”.

The move sparked headlines and at least one petition aimed at stopping the measure in its tracks. Yet before the bill can become law, it has to move through the legislature, setting the stage for events like Wednesday’s hearing before the Washington Senate Commerce, Labor & Sports Committee.

The hearing drew a mixture of support and opposition for the bill, during which lawmakers asked a number of questions about the tech. Also appearing were representatives for the Washington State Liquor and Cannabis Board, which has called for businesses in the state to shift toward electronic payments.

Among those speaking against the measure were representatives from Posabit, a bitcoin point-of-sale developer based in Seattle.

In remarks, co-founder and CEO Ryan Hamlin spoke about the concerns among cannabis business owners who face the risk of robbery – a trend in the US affecting marijuana shops that rely on cash because they’re effectively locked out of the banking system owing to the nature of their business.

Hamlin told committee members:

“Anyone can Google about the robberies that are happening. Cash in this environment is a problem.”

Hamlin reiterated the focus on store owner safety, arguing that “we are removing cash from the system which is helping our customers become safer”.

Yet another payments company servicing marijuana firms in the industry expressed strong support for the bill. PayQwick offers payment services to businesses and consumers in the space, as well as cash handling services.

Kenneth Burke, the firm’s CEO, invoked the newly-minted Trump administration and the as-yet-unconfirmed US Attorney General nominee, Sen. Jeff Sessions in his statements. Sessions, who according to Politico has called marijuana legal reform a “tragic mistake”, is likely to enforce the federal ban on marijuana more decidedly than the Obama administration.

“I think allowing bitcoin in consumer transactions in Washington is just going to invite extra scrutiny from Sessions and the federal government,” Burke told the panel.

On traceability

One point of contention during the hearings was the question of whether bitcoin transactions are traceable.

Among those was Burke, who argued that “with bitcoin, there’s just no traceability to it”.

But on the contrary, every bitcoin transaction is published to the public blockchain. Instead of being attached to a particular identity though, bitcoins are attributed to pseudonymous addresses. Actual identification of a user happens outside of the bitcoin system itself, as in the case of an exchange conducting a know-your-customer process.

Joseph Cutler, a partner for the law firm Perkins Coie who is based in the Seattle area, disputed the notion that bitcoin transactions can’t be traced.

“This idea that it’s untraceable is simply false. People also say bitcoin is anonymous,” he told the panel. “This is also false. We like to call it pseudonymous, which is better than cash.”

Cutler went on to invoke once again the problematic use of cash in cannabis businesses.

“In the marijuana space, for example, cash is king,” he said, adding:

“And there is no traceability to the customers for the cash they’re using in those stores.”

A video of the hearing can be found below:

Image via TVW