The number of banks in the United States willing to lend to hemp producers can be counted on one hand.
That is about to change.
The New York Times is reporting that federal and state bank regulators announced Tuesday that they were scrapping a burdensome requirement that banks said kept them away from the hemp business.
Banks will reportedly no longer have to treat their hemp customers as suspicious and file reams of paperwork to anti-money-laundering authorities for each interaction.
The change could provide a major boost to a niche product that began its own legalisation process last year, accounting to the new report.
“Banking has been an ongoing problem,” said Erica McBride Stark, the executive director of the National Hemp Association, a trade group for growers.
“So this actually should be quite helpful.”
Hemp products are made from the same plants that produce marijuana, but they are cultivated to have far less tetrahydrocannabinol, or THC, the chemical that produces a “high” when ingested.
The plants’ stalks can be woven into fabric and their seeds processed into oils used in food, but they cannot be made into drugs.
Even so, federal law long considered hemp to be as forbidden as cocaine and heroin.
But with the legalisation of marijuana spreading across the country — 33 states have legalised the drug for medical use and 11 states will allow sales for recreational use by January — lawmakers in Washington decided to do away with the designation for its milder sibling.
Last year, Congress legalised hemp as a crop and directed the Agriculture Department to start regulating hemp production.
It took the agency almost a year to devise rules for the industry, but once they were released, on October 31, bank regulators prepared to take action.
Tuesday’s statement from the Federal Reserve, the Federal Deposit Insurance Company and other state and federal regulators, informs banks that they can now treat hemp producers like other customers as long as the companies can prove they’re following licensing requirements.