Mastercard has told financial institutions to stop allowing marijuana transactions on its debit cards, dealing a blow to an industry already on the fringes of the financial system in the United States.

Most banks in the country do not service cannabis companies as marijuana remains illegal at the federal level despite several states legalizing its medicinal and recreational use.

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"As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity," a spokesperson for the company said on Wednesday.

"The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems," the spokesperson added.

The move, which would rob cannabis buyers of another easy-to-use mode of payment, was first reported by Bloomberg News.