Hemp regulations bring banking issues to the forefront

On October 29th, the USDA issued interim final rules providing a framework for the legal protection and distribution of hemp in states that choose to legalize it. The long awaited regulations bring about a new stage in what promises to be a phonetic period for compliance innovation as financial institutions begin to provide banking services for products related to marijuana.

What exactly is being legalized?

Up until recently, the distinction between hemp and marijuana did not matter. Both were classified as Schedule I drugs under the Controlled Substances Act. In the 2018 Farm Bill, Congress declassified hemp and allowed it to be produced in states choosing to legalize it. The key difference between hemp and cannabis sativa is the level of THC contained in the leaves of these closely related plants. A THC level in excess of .03 is considered marijuana, while anything below that is considered hemp.

Last week’s regulations provide the framework that states like New York need to start developing the industry consistent with the federal guidelines. Many of us who have followed the issue closely have been surprised that the USDA did not move more quickly to promulgate the proposed regulations. The USDA got the message because it took the unusual step of issuing interim proposed final regulations. This means that there is now a legal framework for states to begin submitting their hemp regulation plans, even as the USDA accepts comments on these proposed regulations. Remember, we are dealing with a crop, and farmers need time to plan in advance of the growing season.

 

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