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Roughly one month after the United States Department of Agriculture (USDA) released the Interim Final Rule for Hemp Production, federal banking regulators have articulated that banking and financial services are both legal and cleared for the nation’s hemp farmers, processors, and ancillary businesses — the entire hemp value chain.

On December 3rd, four federal banking regulatory agencies — the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Financial Crimes Enforcement Network (FinCEN), and joined by the Conference of State Bank Supervisors — issued a guidance clarifying the legal status of hemp and the relevant requirements for banks providing financial services to hemp related businesses. This comes after months of bipartisan urging from Senate Majority Leader McConnell (R-KY) and Senator Wyden (D-OR).

THIS IS ESPECIALLY GOOD NEWS FOR FARMERS AND PRODUCERS OF HEMP-DERIVED CBD, AS THE GUIDANCE CITES THE FEDERAL DEFINITION OF HEMP, WHICH INCLUDES CANNABINOIDS AND EXTRACTS—ALL CLEARLY REMOVED FROM THE CONTROLLED SUBSTANCES ACT.

  • The definition used by this guidance document is expansive and follows the broad definition of hemp used in the 2018 Farm Bill. It makes clear that hemp is not marijuana and is excluded from the Controlled Substances Act (CSA).
  • The term “hemp” is defined in the 2018 Farm Bill as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol [THC] concentration of not more than 0.3 percent on a dry weight basis.”
  • Hemp-derived CBD — as a cannabinoid — is carved out of the definition of marijuana and is clearly not a controlled substance. 

HEMP NOW HAS THE SAME ACCESS TO FINANCIAL SERVICES THAT OTHER CROPS ALREADY ENJOY.

This guidance federal banking regulators means that the entire ecosystem of hemp (growers, processors, brokers, brands, retail, direct to consumer, online, distributors etc.) including hemp-derived CBD products, can become part of the standard federal banking system and have access to normal banking and services. Many of the issues that the industry has faced — such as credit card payments, banking services, and access to capital — should soon become a thing of the past.

  • The guidance emphasizes that banks are no longer required to file suspicious activity reports (SAR) for customers solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations.

  • The statement provides banks with background information on the legal status of hemp, the U.S. Department of Agriculture's (USDA) Interim Final Rule on the production of hemp, and the Bank Secrecy Act (BSA) considerations when providing banking services to hemp-related businesses.

  • Normal Anti Money Laundering/Bank Secrecy Act (AML/BSA) procedures apply to hemp in the same way they would for corn and wheat growers, processors, product manufacturers, retailers, etc.

THE INDUSTRY HAS A CLEAR PATH TO CAPITAL.

Despite the legalization of hemp in the 2018 Farm Bill, many hemp farmers and producers in Kentucky and across the U.S. have faced challenges accessing capital and other important financial products. Now that financial regulatory guidance has been released, we expect that this will greatly increase the pool of capital available to those involved in the hemp value chain.  This includes farmers using forthcoming crop insurance, processors providing a market for farm output, and those hemp-related businesses closer to the consumer finished goods.

BUT THERE IS MUCH MORE WORK TO DO.

Since the 2018 Farm Bill was signed almost one year ago, the industry has undergone a rapid evolution.   The clear intent of this non-partisan Congressional legislation was to give America’s farmers access to another crop in their rotation, especially important in lean commodity times.  And while the federal regulators move slowly to provide the normal legal comforts to hemp and hemp-derived products, the multi-agency approach displayed by banking regulators will benefit the entire hemp value chain, from farm to table.  The remaining gating issue for the floral hemp industry is the path forward from FDA for federally legal hemp-derived cannabinoids, especially CBD, to be used in foods and supplements. As the process moves forward, Congress has promised to assist, and strong leadership from non-partisan sources is expected to continue. 

Stay up to date on hemp industry news and regulatory advancements, visit the U.S. Hemp Roundtable at www.HempSupporter.com.