Suggestion & Surveillance: Talk of Chinese CBDC scares VIPs from Macau
Macau, a special administrative region of China with a gaming industry seven(!) times larger than that of Las Vegas, has been rattled by rumours of a CBDC being introducted. Eighty percent of Macau’s gaming revenue traditionally is derived from just 5 percent of its VIP gamblers, and this fickle customer base plays a crucial role in the Macau gaming market.
Recent rumours that China's CBDC experiments will expand to Macau has seriously rattled junket operators - whose job it is to attract wealthy mainland Chinese gamblers to Macau.
What’s the word on the street?
According to Bloomberg, rumour has it that Macau's casino regulator, the Gaming Inspection and Coordination Bureau, is in talks with casino operators about the introduction of China’s CBDC, the digital yuan.
The report cites unnamed people ‘familiar to the matter’ in the following:
A number of casino operators have been approached by Macau’s regulator over the past few months to discuss the feasibility of using digital yuan to buy casino chips, which are currently denominated in Hong Kong dollars.
[These sources] are saying that the imposition of a traceable, government-linked currency will be the death knell for the industry
The Bureau has recently responded that “the report is false” after shares in casino operator Galaxy Entertainment Group and Macau’s largest junket operator Suncity Group Holdings had fallen by roughly 3% that day. The report also stated that Chinese high rollers are exiting the industry or shifting their cash elsewhere.
Why the impact?
What the situation also comes down to is a common understanding that introducing the digital yuan would give a significantly increased surveillance capability to the Chinese government, via it's central bank, over the sources of cash flowing into and out of Macau.
As Junket service provider, Eric Leong, surmised:
If the water is too clean, there’ll be no fish. The big gamblers will go away if casinos need to be that transparent.
China already in pain
What adds salt to China’s wound is Macau has already been hit hard by the pandemic. According to the latest figures from the Gaming bureau, Macau gaming revenue is down 80.5% in 2020 to $6.58 billion - a significantly larger drop for the "Vegas of China" than the downturn in Las Vegas itself, even before gamblers had to content with potentially increased surveillance.
Be that as it may, China is still consistently pushing ahead with the development and use of its digital yuan, with another pilot due to be trialed in the Suzhou district for the “Double 12” shopping event on Dec 12.