Cannabis Without Apologies

Why would a fairly successful financial executive in his early 70s get involved with a FinTech startup serving the cannabis industry? Richard Laiderman gets asked this a lot. People seem to be curious. His glib answer is that it’s fun. 

In the 1940 essay, A Mathematician’s Apology, G.H. Hardy felt the need to explain why he had spent his whole life on such a useless pursuit of pure mathematics.

Laiderman has a similar feeling about his career in finance. Finance is often accused of not adding value - simply moving money from one party to another while subtracting a fee each time. Stock-picking portfolio managers collect hefty fees and generally underperform passive indexes. 

Today finance, and financial engineering, are burdened by an even heavier accusation - not just being extractive but causing great harm - as in the subprime mortgage meltdown of 2008. When Richard retired from finance in 2018, he wanted to use his background in a more righteous way requiring fewer apologies.

Richard Laiderman’s background contains both mathematics and finance. While he never felt the need for mathematics, during his career in finance, he often had misgivings. He worked on tax and regulatory loopholes, structuring securities, and trading ideas to add basis points to the bottom lines of giant corporations. So in his semi-retirement, he looked for a nobler purpose, one that might make the world a little bit better.

At the time, cannabis had just become fully legal in California. One of the public policy goals in California was to redress the harm done to those who suffered from over-prosecution of minor offenses.

The problem was, and is, that most banks and other financial institutions decided, based on federal law, to have a zero-tolerance policy despite state legality. Without bank accounts, these businesses can only accept cash and pay vendors, suppliers, and even tax obligations in cash. Armed security is required. Many move cash in their cars. Cash goes missing. There are robberies. There are deaths. This ends up hurting the smaller players the most. The very ones that public policy aims to help. It reminds Richard of redlining.

This is a complex problem to solve, but if solved, it might make the world a little bit better. The irony is not lost on Richard that in trying to find a “good” project, Laiderman got mixed up in cannabis. Egads!

On the whole, he believes the need for apology weighs more heavily on those who, even today, condemn cannabis to Schedule 1 status; and to those who, mainly in the past, overzealously prosecuted minor offenses and those who today turn a blind eye to the everyday needs of cannabis business owners.

It’s possible for Financial institutions and cannabis businesses to do business electronically and safely. Businesses are heavily vetted for licenses and ownership. Banks and credit unions need the tools for KYC, KYCC, and CDD. Insurers, payroll providers, lenders, and vendors must know that members are legitimate and compliant. Businesses should know their supply chain is legitimate as well.

A platform with a blockchain backbone to have data-rich digital records for audit and regulatory purposes gives the potential for smart contracts to automate account opening and transaction approval.

Banks struggled with slow and manual account opening processes. Document collection, wet signatures, face-to-face identity checks, and internal bureaucracy cause the process to be frustrating to customers and take months to complete. To address this,  a platform feature was built to collect all opening account documents in one place, easily accessible by all parties. The feature also allows parties to exchange messages.

The related problem is that each institution had to repeat these manual processes. If the business needs a second bank account, the cycle starts again. If an insurer or payroll provider wants to onboard the exact customer, they must repeat much of the same diligence.

The need is for a portable digital identity - a data-rich digital object that could be presented to any institution, counter-party, vendor, or regulator that would contain up-to-date verification of the business’ good standing - a perfect use-case for blockchain.

The “aha” moment was realizing that the need for portable digital business identity (PDBID) (pronounced “pid bid”) extends far beyond cannabis to almost all small and higher-risk businesses. These are businesses that banks and other financial institutions cost-effectively struggle to onboard and service. This results in higher prices and limited access to financial services.

The vision is that PDBID can set a new standard for cost-effective compliance and due diligence. It streamlines onboarding and monitoring for financial institutions. It allows hard-to-serve businesses easier access to financial services. It makes the B2B marketplace safer and better.

So, besides having fun, that’s the story of why Richard Laiderman got involved with StandardC and how we have progressed so far - no apologies. In his semi-retirement, he still enjoys mathematics and other useless pastimes like chess and Go - no apologies. There is one exception. He apologizes to his wife, who wishes he would spend less time on all of the above and more time on her.