History

1.1 The History of Investing in Cannabis & Crypto - Problem Statement

In many ways the history of legalised Cannabis and Crypto have run largely in parallel.

Initially there was unbridled enthusiasm and optimism, whereupon a variety of immature, and often naïve, business models were adopted.

Whilst this phase played out, we discovered the full spectrum of ‘bad actors’, fuzzy thinking, empty promises, and fraud.

Then, more measured, better prepared use-cases and organisations begin to appear, and some fundamental economics begin to establish themselves.

More recently, respectability has been achieved by a select handful, and more mature commercial models are established based upon performance. Sector characteristics and important criteria in both sectors are slowly emerging.

Investment has largely followed similar parallels.

Today, we find a fascinating set of circumstances. Bitcoin has moved ‘mainstream’ via approved ETF’s, with Ethereum likely to follow in due course. The two other significant Crypto market sectors that have attracted confidence over the last 18 months are DeFi and RWA’s, both based very much on conventional asset classes.

In Cannabis, inconsistent regulatory regimes and rigidly conservative investment markets combine to offer highly limited and fundamentally flawed investment opportunities. Some quick simple observations highlight the problems:

• Canada is only now just emerging from a completely flawed devotion to ‘vertical integration’ (based upon elaborate production assets), ‘hyped genetics’ and ‘brand loyalty’. The consequence being $B’s of losses and capital markets that have been largely closed to Cannabis for over 12- months.

• Whilst the US retail market has burgeoned, the dichotomy between State legalisation and Federal prohibition means that there is simply no access to investment opportunities.

• In the EU, UK and Australia, only medicinal Cannabis was legalised. These markets are, therefore, even more regulated and only a fraction of the size of those in North America. More importantly, their business models follow the early Canadian ones and are yet to realise the losses that will be experienced there.

• The public capital markets in the EU, UK and Australia are highly restricted.

• Interestingly, the Crowd Sourced Funding model has enjoyed comparative investor enthusiasm, at least in Australia, though the prospects of any meaningful investment returns are unlikely and ill-liquid.

• Any stock listed on the publicly traded markets such as the London Stock Exchange (LSE) or the Australian Securities Exchange (ASX), cannot be concerned with any recreational products of any fashion.

• US based recreational Cannabis businesses, which account for the next 20 largest markets outside of Canada are still largely ‘de-banked’.

Having actively canvassed all mainstream international capital markets in search of capital for considered well prepared Cannabis assets for the last 18 months, the Founders of New Leaf can attest to the scarcity of capital and the lack of sophistication in those investment circles.

The marriage or Cannabis and Capital is dysfunctional throughout the World. Why can’t we bypass these barriers and pitfalls?