Macau & Digital Yuan: Could It Be the Dawn of a New Era for Macanese Casinos?

Article by : Helen Dec 15, 2020

Digital yuan, the cryptocurrency developed by the Chinese government and backed by its central bank, could be making its way to Macanese casinos. According to a Bloomberg article published on December 2, Macau is in the early stages of negotiations with mainland China to introduce the digital yuan as a payment method for acquiring casino chips. If this does happen, the cryptocurrency would replace the Hong Kong dollar that the casino players have to use at the moment.

The Bloomberg article made so much noise that the Gaming Inspection and Coordination Bureau of Macau released a short statement the same evening denying there are any talks about introducing the cryptocurrency in the enclave.

The published article, in its turn, cites only anonymous sources that “asked not to be identified because they’re not authorized to speak publicly about the discussions.” These sources told Bloomberg that “a number of casino operators say they have been approached by Macau’s regulator, the Gaming Inspection and Coordination Bureau, over the past few months to discuss the feasibility of using digital yuan to buy casino chips.”

Whether there are such talks or not, the damage was done. The stock prices of the leading casino operators doing business in Macau – Galaxy Entertainment Group Ltd., Wynn Macau Ltd., and SJM Holdings Ltd. – fell by 3%, 2.5%, and 1.4%, respectively. Suncity Group Holdings Ltd., one of the largest junket operators in Macau, also saw their stock prices drop by 2.8% the same day.

If we ponder the hypotheticals of digital yuan replacing the Hong Kong dollar in Macau’s casinos, there is one thing for sure: it would reshape the industry.

First, junket operators – companies that act as middlemen (and, basically, travel operators) between high rollers from mainland China and casinos – rely on currency exchange fees for their income. Should there be no need for currency exchange, they’ll see their income decline. Second, junket operators are concerned – and for a good reason – that introducing the digital yuan will scare off many high rollers from mainland China.

While most private cryptocurrencies exist as an anonymous and untraceable payment method, China’s digital yuan is anything but that. Considering an impressive track record of the Chinese government breaching its citizens’ privacy, it’s not hard to imagine digital yuan being used to track cash flow in and out of mainland China.

On the other hand, China’s alleged desire to use digital yuan in Macanese casinos is understandable: the industry is at a higher risk of money laundering than others, after all. Besides, junkets often have ties to organized crime, like we could see in a scandal revolving around the Crown. Introducing a cryptocurrency would make tracing the origin of the used funds a lot easier – so it would be good for detecting money laundering activities. And it would force the shady operations to either halt or be out on pause. However, it’s worth noting that China’s central bank-backed cryptocurrency is still being tested, and it’s not even clear when it will be launched yet. The main goal behind it is ambitious, though – the digital yuan is supposed to replace physical cash at some point in the future.

So far, the government has launched several pilot programs throughout the country. One of them took place in Shenzhen in October this year – the People’s Bank of China gave out 200 yuan ($29.75) each to 50,000 randomly selected people for them to spend in certain shops. And, according to Yi Gang, the governor of the country’s central bank, the cryptocurrency has already been used for 4 million transactions for a total of more than 2 billion yuan ($299.07 million). So, it seems that the digital yuan is here to stay.

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