UPDATE (19th January 22:25 BST): This article has been updated with comment from Sen. Ann Rivers, the primary sponsor of the bill.

A new bill filed in the Washington State Senate is seeking to prohibit local marijuana businesses from using bitcoin.

Sponsored by Senators Steve Conway and Ann Rivers, SB 5264 seeks to amend some of the state’s rules governing the sale and distribution of marijuana products. The move comes more than four years after Washington voters passed a ballot measure legalizing marijuana in November 2012.

Under the proposed rule, businesses that work in the local marijuana industry would not be allowed to either pay for goods with digital currency or accept those kinds of payments from customers. The bill also includes a definition of “virtual currency” that explicitly targets “digital representation[s] of value used as a medium of exchange, a unit of account, or a store of value”, but excludes the “the software or protocols governing the transfer”.

Firms that grow marijuana or sell products that incorporate it would be covered under the proposed law’s provisions.

The bill states:

“A marijuana producer, marijuana processor, or retail outlet must not pay with or accept virtual currency for the purchase or sale of marijuana or any marijuana product.”

Washington was notably the site of an early adopter of bitcoin among marijuana dispensaries: Spokane-based Kouchlock Productions. The firm began accepting payments in the digital currency in 2014 and would be affected by the new bill (representatives of the company did not immediately respond to a request for comment).

In a statement, Sen. Ann Rivers said that the measure is aimed at boosting transparency in the state’s marijuana industry, in a bid to “help move it out of the shadows”.

Rivers told CoinDesk:

“One of the goals of my Cannabis Patient Protection Act, which became law in 2015, was to eliminate the black and gray markets for cannabis in our state. SB 5264 addresses another part of the regulatory challenge. After all the work we’ve done to get a handle on the cannabis industry and help move it out of the shadows, allowing the use of unregulated currency for cannabis purchases doesn’t promote the level of transparency we committed to develop.”

Business impact

The measure, if passed, would likely be seen as a blow by proponents of the marijuana industry’s use of digital currency as a means to circumvent a key issue facing those businesses today: a lack of banking access.

Simply put, most US banks are loathe to allow marijuana-focused companies to open accounts due to the federal prohibition of marijuana. While some US states have passed ballot initiatives in recent years that have either approved medical or recreational use of marijuana, the federal ban keeps most banks on the sidelines.

Some advocates have therefore argued that bitcoin and other digital currencies can help ease this pain point by giving those companies a functioning payment mechanism.

Rob Fess, director of marketing for wholesale marijuana sales platform Tradiv, told CoinDesk that the proposed law further highlights the impact of the effective bank blockade against businesses in the industry.

However, he suggested that some kind of legal backlash is likely in light of the proposal.

“It seems like quite a stretch to single out a specific industry to be excluded from using a particular type of payment – I imagine the lawyers will have a field day with that,” he told CoinDesk.

A full copy of the bill can be found below:

SB 5264 by CoinDesk on Scribd

Image via Shutterstock