By Lucas Laursen
October 17, 2018

Canada legalized the sale of marijuana for recreational use starting last night. The federal government set a few baseline rules and left others to the provinces. That differs from the U.S., where many states have decriminalized or outright legalized use of marijuana ranging from medical to recreational while the U.S. federal government has turned a blind eye to the whole affair

But turning a blind eye turns out to have consequences, too. Until yesterday Uruguay was the only country to have legalized the entire value chain for adult recreational use of marijuana. But because the country uses U.S. dollars, its legal marijuana sellers cannot tap into U.S.-regulated financial systems such as U.S. banks or the major credit card networks, which are forbidden from handling drug money. Like marijuana businesses in Colorado, California, and Washington state, the Uruguayan sellers have had to resort to cash, with all its attendant risks.

Businesses in Canada will not have that problem. But they may run into another problem Uruguay encountered: limited legal supply. Canada grows a lot of marijuana already, legally for medical purposes and illegally for the black market. The federal government will have to license more industrial growers to grow its new legal recreational market. Individuals can only grow up to four plants for their own use. Rules for edibles are also still a year away.

“It’s like trying to merge a five-lane highway into a one-lane country road. It’s tough to get everything through the bottleneck on a timely basis,” University of Waterloo economist Anindya Sen told the San Jose Mercury News. And relations with its southern neighbor will also put a damper on the party: U.S. border officials can bar from entry Canadians who admit to having used marijuana or whom might be traveling on marijuana-related business.

Still, international businesses and investment funds have been hovering around the market for years, waiting for the time when they could legally invest in large-scale industrializing marijuana cultivation and distribution. Several medical marijuana producers are already on Canadian stock markets.

Elsewhere in the world, Georgian and South African high courts issued rulings earlier this year that legalized personal use of marijuana without legalizing sales. At least a dozen other countries have informal policies limiting enforcement of marijuana laws without providing for a legal infrastructure for its production and sale.

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