Bloomberg: Digital yuan rollout will reshape Macau’s gaming industry

Operators of the world’s largest casino hub are concerned about the possible introduction of a digital currency backed by China’s central bank in Macau, Bloomberg reports, citing its own sources.

Some companies that arrange trips to Macau for major Chinese players, which bring the city up to half of gambling revenue, are exiting the industry or shifting resources elsewhere. In their words, the introduction of a government-tracked currency would be the death knell for an industry that has already been hard hit by the pandemic (a $27 billion revenue shortfall this year) and by tighter rules on high-stakes gambling in recent years.

Although no official plans have been announced, a number of casino operators told the publication that regulators in Macau have approached them in recent months to discuss the possibility of using digital yuan for purchasing chips, which are currently denominated in Hong Kong dollars.

The discussions are still at an early stage, and there is no final decision on whether to proceed, the Bloomberg sources said.

In their view, the introduction of the digital yuan would be a substantial blow to the industry. The big players, which generate $17 billion in gaming revenue a year, are likely to relocate to other, less-regulated jurisdictions, including the Philippines and Cambodia. Even smaller operators may view the increased transparency of financial operations with caution.

“With broad adoption of the digital yuan, it will deal a serious blow to both the VIP segment and the mass market. It will breach client privacy and curb the number of bets people can place, limited by the foreign-currency conversion cap set for the digital yuan,” says Zhou Jinquan, associate professor at the Macau Polytechnic Institute’s Center for Gaming and Tourism Studies.

However, a number of experts argue that the use of the digital currency could benefit Macau’s gaming industry. The lack of need to convert funds into foreign currency would allow broader access to the mainland Chinese market, they note.

Moreover, at present, playing in Macau casinos requires bank cards or cash, which are not as widespread in China, while digital payment systems such as Alipay and WeChat Pay are highly popular. In this context, the digital yuan could help attract a larger user base to casinos.

Bloomberg sources noted that authorities are considering using the digital yuan in casinos only. Alipay and WeChat Pay are not included in the plan, as they would not help the government track capital flows.

How China Became a Leader in Monetary Innovation Thanks to the Digital Yuan (DCEP)

As a reminder, in China the DCEP-based payment system continues to be tested — in December the city of Suzhou will conduct the red-envelope lottery, repeating the Shenzhen experience.

Primitive Ventures’ managing partner Dovi Wan says that the DCEP will allow the central bank to exert even greater control over monetary policy.

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