On Wednesday, September 25, 2019, the United States House of Representatives passed the Secure And Fair Enforcement (SAFE) Banking Act of 2019. This is the first stand-alone cannabis reform bill passed by the House. If passed by the Senate and signed into law by the President, the bill will provide much needed relief to the cannabis industry, long prevented from accessing traditional banks, insurance and other financial services companies.

The SAFE Act generally prohibits a federal banking regulator from penalizing a depository institution for providing banking services to a legitimate cannabis-related business.  A “cannabis-related legitimate business” means a manufacturer, producer, or any person or company that participates in any business or organized activity that involves handling cannabis or cannabis products, including cultivation, production, manufacturing, selling, transporting, dispensing, distributing, or purchasing cannabis or cannabis products, in accordance with the laws of a state or other political subdivision (i.e. city, town, county).

Specifically, the Act addresses many of the fears held by financial services providers that have kept them from doing businesses with those involved in the cannabis industry. For example, the bill would prevent regulators from using an institution’s work with a legitimate cannabis business as a basis for termination or limitation of deposit or share insurance, adverse action on the supervision of loans or penalties for payment collection or processing. This should provide assurances for institutions concerned about potential prosecution for money laundering or conspiracy charges related to work stemming from work with an industry that remains illegal federally, and accordingly relief to the cannabis industry, which has been severely impacted by the lack of access to traditional financial services in the United States. It would also reduce the risk that loan collateral could be seized by the federal government, which may allow cannabis industry players to access traditional financing sources previously unavailable to them.

In addition to financial institutions themselves, the bill’s protections extend to ancillary businesses that may derive a benefit from a transaction with a cannabis-related business or service provider, as well as the employees of both cannabis-related and ancillary businesses. The Act broadly defines “ancillary businesses.” Essentially, ancillary businesses are any businesses or individuals that provide goods or services (business or professional) to cannabis-related legitimate businesses or service providers, which are paid for with proceeds that are generated by cannabis-related activities. This would include, but is not limited to landlords, sellers or lessors of equipment, and lawyers and accountants.  And after some revisions to the initial draft of the bill, its protections also apply to insurers of legitimate cannabis businesses.

Given the complexity of financial regulation and the inevitable questions that will arise, the bill directs enforcement agencies to issue guidelines for institutions who work with cannabis-related businesses. For example, the bill would require the Financial Crimes Enforcement Network to address how institutions should handle suspicious activity reports for cannabis-related businesses. The Financial Institutions Examination Counsel would also be required to issue guidelines. These guidelines could form the basis for operational policies and procedures for cannabis companies to ensure access to financial service providers.

Further, acknowledging that hemp businesses continue to have difficulty gaining access to banking products and services following the passage of the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) legalizing hemp and hemp derivatives, the bill requires federal banking regulators to issue joint guidance on the subject. Specifically, the bill directs federal regulators to confirm the legality of hemp and hemp-derived cannabidiol (CBD) products, confirm the legality of providing financial services to those industries and provide guidance on best practices for working with them.

The House’s passage of the SAFE Act marks one of the first major steps toward cannabis reform at the federal level.  As of this writing, the bill has been received by the Senate and referred to the Committee on Banking, Housing, and Urban Affairs. The Senate’s treatment of the bill will be a good indicator of that body’s appetite for cannabis reform.

While hemp is not a panacea for endemic poverty in Latin America & The Caribbean, the region’s climate, land mass and generally liberal policies toward cannabis signal vast potential for a thriving sector.

“The hemp industry is in line with sustainable business principles, providing economic, social and environmental benefits,” said Barbara Galletti, CEO of Pronatura Ltda., and co-creator of Nutranabis, the first Chilean brand dedicated to the re-introduction and commercialization of organic hemp products in Chile.

“These principles are essential not only to reduce poverty levels but also to promote social justice and a healthier planet,” Galletti said. “The hemp industry fits perfectly in this new business model.”

Galletti will talk about her odyssey through hemp in Chile at the Latin American & Caribbean Hemp Summit, Nov. 8-9 in Montevideo, Uruguay. The gathering of leading international hemp stakeholders is set for the Hyatt Centric Hotel in Montevideo.

Clearing a path

Governments across Latin American and Caribbean are steadily moving to decriminalize marijuana and other soft drugs, along the way further clearing the path for industrial hemp. Cultivation, production and distribution of hemp is legal throughout most of Latin America and the Caribbean, and a system of effective banking and regulation for trade is in place.

With liberal policies that allow access to cannabis for therapeutic uses, there is a wide berth for hemp extracts in Latin America, most importantly CBD. The total Latin American population of more than 650 million spends $354 billion on healthcare and $117 billion on pharmaceuticals, indicating dramatic potential.

Argentina, Chile, Colombia, Peru and Mexico all have passed medical cannabis laws.

Enlightened policies

Uruguay has perhaps set the best example, with enlightened laws that guide its cannabis and hemp markets from production to distribution to retail, while putting human rights at the center of the country’s strategy. Uruguay also pioneered the “full 1% THC” standard for industrial hemp. Ecuador followed this year.

Other enticements: Several Latin American countries are proven food growers and exporters, and many have climatic conditions conducive to growing three hemp crops per year.

The Summit will look at innovative developments spanning a wide range of sectors and issues, and feature country reports from leading Latin American and Caribbean markets.

Frank look at CBD markets

The critical and timely issue of what’s happening in the international CBD markets will highlight the Summit. With the opening of the U.S. market following passage of the 2018 Farm Bill, some have said a crash is inevitable. Yet other stakeholders have pushed back against that idea, noting crop failures will depress supply while supply chain development has significantly widened the pipeline to CBD consumers in the USA. Meanwhile, in Europe, CBD isolate suppliers say prices are tending drastically downward.

Other scheduled presentations will explore:

• The potential social & environmental impact of sustainable hemp and cannabis cultivation in Latin America
• International CBD and Industrial Hemp Seed
• A solar-powered hemp factory
• Innovations In Hemp-Derived Water Soluble CBD
• Hempcrete’s potential for carbon capture, for climate goals and business
• Technology for small and medium-size hemp farming
• Building integrated energy storage
• Drafting legislation and regulations for the hemp industry
• The status of international cannabis policy

Other speakers confirmed for the two-day Summit are:

• Sergio Vazquez Barrios, Ministry of Livestock, Agriculture and Fisheries, Uruguay
• Daniel Kruse, Hempro International GmbH & Co. KG; HempConsult GmbH, Germany
• Diego Bertone, Hemptech, Argentina
• Mike Leago, iHempX, High Grade Hemp Seeds, USA
• Leandro McMahon, Gmiracle SAS, Colombia
• Juan Mato Paredes, Orinoco Hemp, Colombia
• Dean Harris, TabBrands, USA
• Hana Gabrielova, Hempoint, Czech Republic
• Jose G. Ojeda, Octagon Consulting Group & Cruz Verde, Inc., Puerto Rico
• Raul Elizade, HempMeds, Mexico
• Pamela Bosch, Highland Hemp House, USA
• Heinrich Wieker, Henry’s HempHarvester, Germany
• Luke Dandrea, Clone Connect, USA
• Carl Martell, Advanced Hemp Technologies, Canada
• Jindrich Voboril, Cannabis policy expert, Czech Republic
• Kevin Nafte, YVY, Uruguay
• Barbara Galletti, Pronatura, Ltd. Chile
• Sanford Stein, Lowis & Gellen LLP; Cannabis Law LLC, USA
• Kehrt Reyher, HempToday, Poland

The main sponsor of the Latin American & Caribbean Hemp Summit is international advisor HempConsult GmbH & Co. KG, Germany. Other sponsors are Clone Connect, online hemp marketplace iHEMPx.com; and HGH, all of the USA; and mh Medical Hemp GmbH, Germany.

China has a zero tolerance approach to marijuana (along with numerous other drugs), yet surprisingly it is the world’s largest producer of hemp, and also the world’s largest exporter of this increasingly lucrative plant. While chances of medical marijuana being legalized in China are seemingly next to none, calls for a clear policy when it comes to industrial hemp and CBD products are increasing — as is the plant’s production in the country.

While cannabidiol (CBD) has become as widely proliferated as over-the-counter painkillers in the West, products using this hemp-derived compound have yet to be seen stocking store shelves in China. The plant it originates from, however, has had a far lengthier history. Ma (麻), the Chinese word for hemp, has actually been in use for thousands of years, widely enough that the classic text Book of Odes, or Shi Jing (诗经), contains many references to hemp use in the daily lives of Chinese people from the 11th to 7th century BCE.

The cultivation of hemp was made illegal in 1985, despite China having a long history with the crop. It was only in 2010, after a push by locals, that authorities again allowed it to be grown on an industrial scale in Yunnan province in southwest China.

Marijuana plants containing the psychoactive agent tetrahydrocannabinol (THC) are to date resoundingly illegal within China — despite what Randy from South Park might think — but plants containing quantities of CBD fall into a grayer area.

As it stands, companies are allowed to farm industrial hemp in Heilongjiang and Yunnan provinces (in China’s northeast and southwest respectively). China Daily reported early this year that talk of farmers being allowed to grow industrial hemp in Jilin province (next door to Heilongjiang), which had begun in 2017, had proven fruitful. Additional sources attest that hemp is also legally being grown in regions such as Anhui, Gansu, and Xinjiang.

Figures provided on Hanma Industrial Group Co. Ltd.’s website — one of China’s leading hemp producers — show that half a million hectares of land were used to grow hemp in Anhui province, close to Shanghai in eastern China, in 2014. Other provinces, excluding Heilongjiang and Yunnan, accounted for 0.4 million hectares. Curiously, many media outlets fail to report these facts.

This confusion as to the location of hemp farms in the country is perhaps related to the distinctions of industrial hemp. Industrial hemp is a marijuana plant (cannabis sativa L. subsp. sativa var. sativa) specifically bred to contain the least amount of THC possible, and has a wide range of applications. Industrial hemp is the most commonly farmed hemp strain, although China is home to hemp plants from 33 families and more than 90 genera, including ramie, flax, jute, kenaf, sisal hemp, and abaca.

With that being said, police have historically targeted marijuana plants grown outside of the industry complex. This year, for instance, authorities eradicated 10,000 wild plants growing alongside the Yongding river in Beijing’s Fengtai district.

The mood at the Industrial Cannabis Forum of Listed Companies in mid-August was pragmatic in the face of such continued confusion over regulations in the industry. Participants called for more clearly defined policies on the issues, while Yuan Hua, general manager of Kunming Pharmaceutical Group, said that China’s cannabis industry will need an additional two to three years’ time to establish itself. Her suggestion for companies in the meantime was “research and development,” in order to create new pharmaceuticals and products and lay the groundwork for the future of the industry.

With the recent rise in products containing CBD around the globe, Chinese hemp farmers and companies have begun to turn their attention to cosmetics, pharmaceuticals, beverages, and other products that use CBD in some form.

Tan Xin, chairman and founder of Hanma Investment Group Co. Ltd., tells us: “We did a lot of research in the early days and saw that investors like Peter Thiel and George Soros had put money into this industry. We believe this business has huge potential.”

As an example of the potential lucrative nature of this industry, consider that July to late September/early October is usually harvesting season for hemp plants in China. As more companies seek to gain a foothold in this fledgling market — and news of developments like the legalization of industrial hemp farming in Jilin province has spread — stock prices for firms such as Dezhan Health and Meiyingsen have soared this year not only during harvest time, but since the beginning of 2019, prompting international media outlets like The New York Times to sit up and take notice.

Yet in a move that perhaps put a damper on the industry, the Chinese National Anti-Drug Committee published a release in mid-March earlier this year re-clarifying the country’s stance on industrial hemp farming. The release plainly stated that CBD is not included on the list of narcotic drugs in the country, and that it is not a controlled drug. It also stated that marijuana with a THC content of 0.3% or less can be grown in certain parts of China. While this release certainly clarified parts of China’s stance on CBD, it was also vague in many areas and had a negative effect on multiple stocks on Chinese exchanges, prompting investors to sell off.

Nonetheless, people like Tan are optimistic about the future of CBD in the country, particularly in the beauty industry. “Nowadays, CBD is considered an ‘all-purpose ingredient’ [for beauty] in the Western world,” says Tan. “It not only has a therapeutic effect on skin diseases, but is also effective in terms of oil control, acne, and skin whitening.

While research and development for all types of products using CBD is technically legal, only beauty products with CBD are legal to sell in China.

“Since 2015, ‘hemp leaf extraction’ can be legally used in cosmetics,” says Tan. “And because the cosmetics industry is so huge in China, we have a good shot in this business.”

He adds however that pharmaceuticals and health products remain the company’s biggest priority at the moment.

All of this points to the crux of China’s argument for the widespread legalization of industrial hemp farming and CBD use in medicine: health.

Many tout the benefits of CBD in treating conditions like epilepsy and Alzheimer’s, as well as providing pain relief, though research on some of these claims is as of yet inconclusive. According to a report by Global Times, China holds 309 of the world’s 606 hemp-related patents, but due to legal restrictions, Chinese-made food and medicine containing CBD can only find a market outside of the country, in places like the US and the EU.

As Tan puts it, “the hemp industry is a health industry. Nothing will keep us from the pursuit of health.”