Are you a cannabis / marijuana related business startup thinking about Coinbase for bitcoin payment processing? Sadly, prepare to be let down and have any personal accounts closed permanently just for asking permission to use Coinbase.
Let me start with this... I say 'sadly' because I really did have higher hopes for Coinbase. I have used them personally for years. I liked their company idea, their execution of services, they are US based, and I liked the personal relationship I had with them prior to this incident. Given that, the following is how things went down:
A SHORT INTRO - MY CANNABIS PROJECT
I am an entrepreneur and love creating online web-based businesses from the ground up. Therefore, I do a decent amount of online business startups (usually around 3 per year). I tend to gravitate towards new, emerging or niche markets and many times find myself dealing with a "high risk" business model. Finding good payment processing has always been the biggest hurdle in getting off the ground for these startups, regardless of if they are completely legal or not.
In this specific case, I created a really nice crowdfunding website for cannabis industry users. It works a lot like Kickstarter or GoFundMe... Users have an idea for a fundraising campaign, they create it for free on the website where the public can donate funds to them. Campaigns can offer 'rewards' for donations at certain levels as cool incentives. The website takes a small percentage of the donations as its 'service fee' and the rest goes to the campaign owner.
The website does not allow anything illegal. You can not buy or sell weed in any way. You can not offer any items for rewards that are illegal in any way. All campaigns must be approved by the website administrator before they go live to the public. You can not receive any kind of business 'stock' or holdings in any way. All possible ways for people to abuse the system have been accounted for.
After going through all the work of designing, creating and testing the business and software, it is now time to get payment processing nailed down so the site can be launched.
THE NEED FOR PAYMENT PROCESSING
While not holding my breath, I initially hoped to get PayPal on board for ease of use and market acceptance. I wrote-up and sent a proposal describing my business project and asking for permission to use their payment processing services. After going back and forth for a few days getting them any extra information they needed to make a decision, I received a very polite 'denial'. I had fully expected this because PayPal is notorious for not allowing higher-risk businesses to use their services. For reference, here is my denial email from PayPal:
Next, I decided to approach Stripe. I sent them the exact same proposal and went through the same steps over the next few days, providing them with any extra information they needed. After about 2 weeks, I received a very polite 'denial'. For reference, here is my denial email from Stripe:
COINBASE FOR PAYMENTS? HELL NO!
Wait a minute... Maybe I could mesh two of the worlds most controversial new markets together in one legally sublime service offering! How cool would it be to allow users to donate both bitcoin and cash seamlessly... With Coinbase, bitcoin is converted instantly, at current market rate, which means even if someone donates bitcoin to your campaign, you still receive the USD$ without any market risk. That sounded like a win-win.
I went ahead and sent Coinbase the same proposal that I had previously submitted to both PayPal and Stripe. Here is the initial proposal that was sent to Coinbase, Stripe and PayPal:
Immediately, things began to get weird... In the first response I received, they began inquiring heavily into my previous activity with my personal account (which hasn't had any recent activity for over 2 years). Here is the first reply I received from Coinbase:
While this seamed a bit odd, I provided them with any and all information that I could. Here is my reply:
The next reply I received from Coinbase made me scratch my head again... Here is their next reply, digging more into my personal account once again, looking for I am not sure what:
Once again, I am wondering what my request has to do with my old personal account, but I answer their questions anyway. Here is my response:
This afternoon I receive two emails from Coinbase at the same time... The first was an automated "Notice of Account Closure" with no explanation as to why. The second email was the following final response from Coinbase to my inquiry (asking for permission) to use their services for my new business:
You read that right. They have closed my personal account permanently with absolutely no explanation. That is apparently what you can expect if you contact Coinbase asking to use their services for a business in the marijuana industry.
For good measure, I sent them one last email making it clear what has just happened and letting them know that I would be using our communications online:
Do yourself a favor and don't even ask Coinbase to use their services for your cannabis / marijuana related business. Look elsewhere. If you decide to ignore my advise and approach them anyway, at least do it using an email address that is not attached to any personal account with them.
I am off to continue my journey, still trying to find payment processing for my new site.