05 May Cannabis – society’s understanding and acceptance of it is evolving as we discover its medicinal versatility
Cannabis, a word synonymous with smugglers, drug cartels and criminal activity. But society’s understanding and acceptance of cannabis is evolving as we discover its medicinal versatility. Cannabis is now used to treat, amongst other things, severe forms of epilepsy and is used to reduce the side effects of chemotherapy.
In certain jurisdictions, to some extent or other, the use of cannabis has been legalised and it is having a huge impact on their economies. In Canada, for example, in November 2019, the cannabis industry amounted to just over $7.4 billion Canadian (£4.1billion) that month alone.
It seems that cannabis has become so mainstream for the treatment of various illnesses that during the current COVID19 pandemic, in some US States, it has been deemed that cannabis dispensaries are providing essential medicine and have been permitted to remain open.
From a financial services perspective, the sector is still relatively in its infancy. Initial investments in the medicinal cannabis sector were, and to some extent continue to be, private equity investments and more recently debt financing. There are however already some very large players in the pharmaceutical cannabis sector. Some even listed on major stock exchanges such as the New York Stock Exchange but the institutional money hasn’t yet poured into this sector and for the most part, access to the capital markets is not yet possible for the following reasons.
Albeit in some jurisdictions the legislation has been loosened to legalise the production and sale of certain products that contain Cannabidiol (CBD), which have a Tetrahydrocannabinol (THC) content of less than a certain percentage, for institutional money, it continues to be a complicated asset class: in most jurisdictions, the production and supply of cannabis generally continues to be a criminal offence. Providing capital to businesses that produce and supply cannabis can, in some situations, also in itself constitute a criminal offence, notwithstanding that the business may be undertaking its activities legally (e.g. in Canada). In most jurisdictions, any proceeds arising from an investment in such a business (legal activity) also have to be treated as proceeds of crime. Even providing custody for the financial instruments issued by such a company can constitute a criminal offence.
As is evident from the statistics, the sector is growing as its medicinal uses are unveiled and whilst the financial services sector would like to participate in that growth, there is an inability to do so. The sector appears to be well serviced in terms of jurisdictions where licenses are granted for its production (e.g. Canada & various US States) but there also appears to be a need for a jurisdiction from which they can legally structure their businesses and access the financial markets. In the USA, the SAFE Banking Act has slowly being making its way through the legislative process but appears to have stalled.
Gibraltar has never been frightened of innovating ahead of others: online gambling in the 90’s and most recently in the blockchain sector. The time may be right to step-forward once again and lead in what is clearly a growing sector requiring the services that we have become so well known for: corporate structuring within a right tax environment and financial services (most importantly banking). The ability to structure those businesses from Gibraltar, to produce & supply outside of Gibraltar (where it is legal) could aid those businesses and contribute significantly to Gibraltar’s GDP.