China has big plans for its central bank digital currency (CBDC), the digital yuan. Pilot programs have already been introduced to test its ability, but big changes could soon be coming. A report by Reuters indicates that those changes may include Macau’s casinos.
Macau to be Chinese CDBC Guinea Pig
As Macau prepares to introduce new gambling laws and licenses, Chinese regulators will use the chance to extract more from Macau’s casino operators. Reuters reports that they will likely force operators to test the digital yuan in the gaming hub. This was an idea that first surfaced early in 2021.
Companies like Wynn Macau and Sands China won’t have a choice if they want to remain in the $37-billion market. Already, regulators are flexing their muscles. The government consultation paper about the rebidding process suggested ideas such as appointing government officials to oversee daily operations.
Bernstein analysts estimate that the average high roller lost more than $27,000 each time they visited Macau’s gaming tables. It is a favorite haunt for corrupt officials and businessmen. Alvin Chan, the former CEO of the Suncity junket operator, was arrested in December as part of an investigation into illegal gambling. Suncity was involved in facilitating bets for wealthy VIPs. This market segment generated around $8 billion in gaming revenue last year.
China Hopes Its CDBC Will Combat Crime
Yi Gang, the central bank governor, suggested that China’s newly created CDBC could be used to combat crime and solve complex cross-border payment problems. He might have had Macau in his thoughts.
Beijing would like to have greater control over cash flows and customers by migrating the gaming center to digital payments. Macau, because it has its own financial sub-ecosystem, makes it an ideal location to test the technology before it is rolled out on the mainland. This is despite Macau’s gaming regulator previously asserting that it would not include digital yuan gaming options.
Other companies are also considering cashless casinos that use traceable funds. Australia’s Star Entertainment says that it is looking into digital payments to appease financial and gambling watchdogs. In the US, several initiatives are underway in different states to advance cashless gambling.
Macau casino operators like Galaxy Entertainment and Wynn Macau were once VIP favorites. However, this is no longer the case. According to official data, the mass market now accounts for almost 90% of gaming revenues and two-thirds of all earnings.
The Chinese CDBC is already in use, as Reuters points out. Pilot programs have already witnessed Chinese consumers spend $10 billion worth of digital currency.