Use of Chinese digital currency in Macau could aid surveillance – Bernstein

Posted: May 20, 2022, 8:46 a.m.

Last update: May 20, 2022, 8:55 a.m.

China is actively pursuing the creation of a state-run digital currency. He could visit casinos in Macau, a move analysts at brokerage firm Bernstein said would make financial oversight more flexible.

chinese flag
The Chinese flag. China is moving forward with its digital currency, which could become part of Macau’s financial system. (Image: Getty Images)

A Thursday memo from Bernstein suggests that Beijing may allow Chinese digital currency in Macau casinos. This could lead Beijing to relax its capital controls due to increased transparency in financial transactions.

While the idea of ​​Macau regulators allowing cashless games based on digital currency has been around for a while, the concept has recently gained momentum. China is expanding its digital currency pilot program and is determined to see it go mainstream, possibly later this year.

China tightens control

The pilot program originally expanded to four cities in April 2020 and six more in October. Since last month, the People’s Bank of China (PBOC) has started to expand the pilot program to 11 cities.

If cashless gambling is adopted in Macau, China’s digital RMB could become an essential part of the infrastructure and provide an edge to enable seamless implementation of large-scale cashless gambling.“Bernstein said.

Bernstein believes central bank digital currency (CBDC), at least as far as Macau is concerned, could be a “one-stop solution” for gamblers and casinos. This would eliminate the need for third-party payment providers and simplify chip purchase transactions. It would also eliminate all transaction costs typically associated with such purchases.

Bernstein explained that the benefits of cashless gaming and digital RMB for Macau’s casinos include anti-money laundering (AML), frictionless gaming, and easing China’s strict cross-border capital controls. All funds, at all times, will be traceable.

He warned, however, that this could reduce demand among the biggest spenders. It could also “discourage high gambling spending, as Chinese customers may believe that their funds used for gambling will be ‘watchful'”.

These concerns are not enough to make Bernstein believe that using digital currency in Macau would be a bad thing. The brokerage recommended the government use the digital alternative, saying transparency could help the government ease restrictive measures and encourage more mass gambling in Macau.

Pump the brakes

China made its digital currency legal tender in October 2020 when it updated its financial laws. It then began conducting pilot programs in Shenzhen, Suzhou and other regions to test its viability.

Shenzhen, located in Guangdong Province, is an important gateway for tourists to Macau and Hong Kong. Suzhou, located near Shanghai, is a major economic center of the country.

It is unclear how any digital currency program in Macau would work. According to some reports, the DICJ, Macau’s gambling regulator, does not want certain digital wallets to operate in Macau’s gambling halls. It is more likely that only a state-issued registered wallet will be allowed.

The Chinese government will be able to track CBDC usage 100%. All data related to the financial system would be stored in a central repository. The central bank will be able to track who is spending money, where and when they are spending it, and how much they are spending it.

The CBDC will have a global impact

It is possible that the digital currency includes hidden switches. It may have an expiration date, according to inside sources. This would force consumers to buy the currency or risk losing it. The government can also easily block individuals’ access to money for any number of reasons – valid or not.

China plans to bring its currency into the digital space. There has been talk of forcing companies to use CDBC even for international trade.

Foreign business entities should be able to transact with the digital currency, as there are global restrictions on using the yuan. The imposition of the country’s digital currency on international trade could disrupt supply lines. As a result, trading would be more difficult and expensive.

Macau is in a precarious position. It must answer to China, which exercises more control over its two special autonomous regions. He also wants everyone to see him as neutral territory. China continues to crack down harder on Hong Kong, and Macau could be next.