For better or worse: Marijuana, Blockchain, and the IMF descend on Ukraine

Published on April 24, 2019

Ukraine has a new president!

Citizens overwhelmingly gave their vote in support of a radical change. The presidential challenger and future president Mr. Zelensky received more support than any other candidate ever in Ukrainian history.

The final count for the election, conducted by Kyiv International Institute of Sociology, shows 72.7% for the challenger vs 25.3% for the president. Ukraine soon will inaugurate the newly elected president.

The new president will have a very short “honeymoon” period. Domestic and international audiences will watch very closely for the specific actions and results in first 100 days of his presidency.

I was lucky enough to see the cannabis industry’s rise in the United States. I was fascinated with its scientific approach and farming process and yet legal disconnect between state vs federal laws.

Marijuana is still illegal at the Federal level at the US but is legalized — or currently have regulations in place — in 36 states for the medical cannabis only use and in eleven states for the medical and recreational as states Ms. Feigenblatt.

Financial and medical benefits of marijuana

The industry world-wide expansion in the next decade will see many countries’ movements to legalize cannabis for medical use with a subsequent trend towards the adult-use legalization.

Canada, Germany, Chile, Croatia, and another 15 countries already legalized medical marijuana. According to Grand View Research, by 2025 the global market will have reached over $146.4 billion. Recent legalization of cannabis in Canada in 2018 will lead to $7.17 billion in economic activity for the country in 2019 according to the report by Deloitte.

In his column for Fortune magazine, Don Reisinger reported that US alone sales of all cannabis-related products reached $10.4 billion in 2018 and more importantly invested $10 billion into industry in the same year vs $5 billion in previous three years. There are expectations for additional $16 billion to be invested in 2019.

Here are some interesting trends on social impact of legalization: reduction of crime, suicide, drag overdose, depression, and alcohol use among the youth. On economic front it provided a major boost to state budgets. California alone had sales “about $3 billion.” In addition to creation of jobs and entrepreneurs, state earned about $600 million in tax revenues.

The economic impact of the legalization of cannabis will further amplify a positive social impact. The population of Ukraine is very similar to California’s one with 37 million people as specified by the World Population Review.

In my opinion, after the legalization, Ukraine can anticipate $300 to $400 million in the first year, growing double digits for the next ten years. I project in five years it should generate $3 billion of annual sales; with 20% of tax collections, the industry will contribute $600,000,000 to the national and/or local budgets annually.

The downstream effect of job creation by suppliers and spin-off businesses makes economic impact even more profound. As an example, СNBC states that in 2018, the marijuana industry in the United States created over 64,000 jobs resulting in 44% growth.

Two birds with one shot: transparent cannabis industry via blockchain

The blockchain technology can even play a bigger role for Ukraine in relation to the transparency and trust. The cannabis industry is a perfect candidate for a full implementation and use of the blockchain technology.

It is a closed and controlled ecosystem with every representative of business cycle present: suppliers, producers, logistics, retail, government regulations, and public oversight. Everything from seed to the final payment by a user at a retail location can be tracked though the blockchain operating system.

Ukraine has a chance to be the first country in the world to set up an industry in the most transparent way possible. It will send a major signal to all international investors for whom lack of trust in Ukraine is a major red flag.

Lastly, the IMF and other global financial institutions working with Ukraine will encourage the development of this new industry. The stigma associated with marijuana is practically gone. More and more countries adopt marijuana-friendly laws. People are comfortable with marijuana in public domain, and its legalization is an irreversible trend around the world.

Ukraine can simply do “copy and paste” of the best laws and procedures from around the world. Experts from all parts of the industry will gladly provide their expertise for the right to be a part of the growing sector. There is a potential for tens of millions of Foreign Direct Investments (FDI) into the country during the first year of legalization.

For future president Zelensky, it could be a bold and radical move. In my view, such a proposal in front of the 70,000 live audiences present and millions of spectators around the world, will immediately demonstrate his willingness to do things differently. “Ze-team” has a chance to show real economic results early on during the term of a new presidentship. Congratulations to Mr. Zelensky and Ukraine.

The world will pay attention now.

Henry Shterenberg is a Columnist at GritDaily. He is the CEO of GTP, the Global Transformation Platform.

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