Legal cannabis businesses are on the brink of gaining access to fundamental banking services.

The Senate legislative panel recently approved a bill, albeit with amendments, aimed at granting regulated marijuana enterprises access to these services.

Legislative Hurdles

Under current federal legislation, providing such services remains tightly regulated, effectively excluding many businesses, particularly small independent operators, from the benefits of conventional banking.

And this isn't limited to just the United States.

In Europe, credit card companies often reject payments made to cannabis businesses operating entirely within the bounds of the law, mirroring the policies adopted by digital payment platforms like PayPal or Payoneer.

Consequently, a substantial portion of these legitimate businesses exclusively deal in cash, making them susceptible to security risks.

No Access to Banking

These businesses can be seen as "circumstantially unbanked."

Carrying cash is also problematic, since it raises issues of security and storage.

For cannabis enterprises constrained by these limitations, cryptocurrencies provide a viable solution.

These digital currencies not only allow secure non-cash transactions but also reduce banking fees and bypass extensive regulatory oversight.

To counteract these challenges, it's easy to see why some legitimate cannabis retailers opt for USDT, in particular the TRON variant, for its apparent efficiency in transactions.

USDT in its TRC20 form has total authorised token amount of almost $45 billion in market cap.

However, the question remains - is this a secure alternative?

Backed By Reserves

For those unfamiliar with Tether, they assert that each USDT token is 100% backed by reserves, encompassing various physical assets such as cash, corporate bonds, precious metals, Bitcoin, and secured loans.

A recent assurance report audited by BDO Italia confirms Tether's reserves exceeding $3.3 billion as of June 30.

While Tether's financial holdings are indisputable except to the most hardened of critics, the fact that these tokens are managed on the TRON blockchain is suspect.

After all, the TRON blockchain is controlled by controversial crypto mogul Justin Sun, who only recently was sued by the SEC for market manipulation charges.

Justin Sun is Manipulating Stablecoins?

Dylan Leclair, the head of market research for Bitcoin Magazine, suggests that Sun's controlling stake in Huobi may be an attempt to manipulate stablecoins.

Consider that Huobi initially held over $1.5 billion in USDT deposits before Sun's acquisition of a major controlling stake.

These funds began to be replaced by the Sun-controlled Staked USDT (stUSDT) after the acquisition.

Leclair alleges that stUSDT claims to invest in "Real World Assets" (RWAs) like Treasury bills, but the flow of funds suggests otherwise.

The tokens are not invested, but remains in JustLend, a Sun-controlled decentralised lending protocol.

Users then end up with stUSDT instead of the USDT they believed they held.

They will nominally manage USDT on the platform, but in actuality manage stUSDT.

And this pattern is not unique to USDT, he asserts. TrueUSD (TUSD), also under Sun's control, exhibits similar behavior.

Bait And Switch?

Leclair suggests that Sun utilises the USDT brand's reputation to swap it for fake stUSDT while it appears as regular USDT in the user interface on Huobi.

This is the blockchain equivalent of palming a ball and pretending that the one under the cup was the same one that was switched out.

According to Leclair, Sun might be constructing a house of cards; an intricate web of deception to siphon USD liquidity out of the crypto market through various fake stablecoins.

On The Flipside

In perspective, however, Sun's actions merely mirror practices in traditional fiat systems where money isn't necessarily backed by RWAs.

Central banks often make similar claims about their paper money, only to print money or act against holders' interests when situations are favourable.

And because of how people have no choice but to adopt fiat systems, that form of centralised trust model is much bigger in scope and scale than Sun can ever possibly hope to achieve.

We simply have to trust that the central bank in question will act for "the common good".

Next Steps

With suitable alternatives only arising if and when the Senate bill is passed, the legitimate cannabis industry will have no choice but to continue to bank on the TRC20 USDT token.

Till then we can only wait and see if this trust in Justin Sun's TRON blockchain is justified or misplaced.