When there’s talk of Amsterdam, many people immediately conjure up the skunky smell of marijuana emanating from coffeeshops. And they wouldn’t be wrong.

The Dutch city is known for its lax laws surrounding soft drugs like cannabis and psychedelic mushrooms. And it’s been that way for several decades. But even still, cannabis companies have trouble landing banking relationships, much like similar businesses in the US.

“It’s quite a complex issue just the same as in the States,” said Oliver Margerison, director at Amsterdam Genetics, a producer of cannabis products that are then sold to coffeeshops and dispensaries. “Every cannabis-related company in the Netherlands has or has had issues with banking facilities.”

How much contention with financial institutions is dependent on the sector the business falls in, and whether or not it can be fully honest about its operations, said Margerison.

For instance, coffeeshops which also sell food and drink are categorized as horeca businesses, a sector that also includes restaurants that don’t sell cannabis.

Barney's coffeeshop in The Netherlands
Barney's coffeeshop, a legal marijuana seller in The Netherlands Bloomberg News

“If you say to the bank you are a coffeeshop, there is no way you will acquire a bank account or any other facilities,” said Margerison. “If you say to a bank you are a horeca company and they do not delve deeper, you most likely will acquire the facilities and once you have received the facilities, it is very difficult for the bank to then retract the facilities if they have not done a full investigation into the company in the first instance.”

This legal loophole allows some cannabis companies to secure bank accounts and accept PIN debit transactions.

Seed companies can fall under several business categories and so, according to Margerison, don’t have many problems acquiring banking services. The biggest hurdle comes when these seed companies want to accept online payment mechanisms such as Visa, MasterCard and PayPal, Margerison said. Online payment providers will not provide services to such companies.

While there are ways to get around this blockade—setting up dummy websites, using middlemen that take high fees or finding unscrupulous companies in China—none of the options are very reliable. Amsterdam Genetics recently dealt with the latter, having set up a partnership with a company in Hong Kong that promised service provision but payment never came, Margerison said.

“It's very frustrating; we want to run a professional, open and transparent business but brick walls are put up at every turn,” he said.

While Margerison says banks and bureaucrats are the ones holding back the cannabis industry, Dave Birch, director at Consult Hyperion, wrote in a Jan. 10 blog post about pushback from the industry to accepting cards. coffeeshops seemed fine with the move, but other stakeholders such as backend distributors were worried, according to Birch.

And that’s because laws in the Netherlands regarding the cannabis industry are a bit inconsistent.

One of the biggest issues hindering the cannabis industry in Holland is the front door/back door regulatory mess. Since 1976, the sale and consumption (the front door) of marijuana in the country has been regulated; it’s illegal but law enforcement is tolerant of it. But the production and cultivation (the back door) of cannabis is completely unregulated and illegal. To Margerison, this makes the industry seem too shady for financial institutions to do business with.

But “the whole industry has been professionalizing over the past few years,” he said. “I really think most shops would accept all cards without question.”

Amsterdam Genetics is currently trying to acquire payment provision through banking institutions in European countries that have relaxed laws in recent years. But this is difficult unless the company has a headquarters in the country.

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