Macau Casinos Could Suffer Greater Losses Through Use of Chinese Digital Currency

Posted on: July 25, 2022, 07:17h. 

Last updated on: July 25, 2022, 01:19h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

China continues to roll out its own central bank digital currency (CBDC), and there’s little doubt that it will become part of Macau’s gambling ecosystem. However, according to experts, the results may not be what China or Macau expect.

Macau casino skyline
Part of the Macau casino skyline at night. Efforts by China to push its state-backed digital currency could negatively impact the city’s casinos. (Image: Focus Gaming News)

A CBDC is essentially digital fiat that a government issues and manages. China’s case also reportedly includes the requirement that consumers and businesses use a state-issued wallet.

That wallet allegedly contains a master On/Off switch that would allow the government to shut off any wallet anytime for any reason – possibly even for no reason. These traits, and the lack of privacy they include, have scholars in Macau raising concerns.

The goal of China’s CBDC is to give the government more control over the flow of capital and reduce questionable transactions. However, according to GGRAsia, the country may not see the expected results.

China’s CBDC May Backfire

The media outlet quotes Macao Polytechnic University’s Zhou Kinquan, who believes that most gamblers would likely avoid the CDBC wherever possible. The use of the digital currency will be “potentially unappealing” to VIPs. It could also find no interest among gamblers in the mass gaming segment.

Another expert, Ricardo Siu Chi Sen of the University of Macau, pointed out, indirectly, an inherent flaw in the CBDC system. He emphasized that transactions would have to be regulated from Macau, the mainland, or both.

However, China has already hinted that it plans on having full regulatory control over Macau. In other words, any regulations that Macau would implement would be nothing more than an extension of China’s control.

The Hong Kong dollar is currently the primary denomination casinos in Macau use. Some analysts have offered the opinion that switching to China’s CBDC would result in improved business efficiency.

Macau Revenue Dropping Fast

Most of the gambling traffic in Macau comes from mainland China. In addition, most consumer products come from the mainland as well.

Should China force the use of its CBDC on Macau, the experts’ comments hint at the possibility that gamblers will look elsewhere. The current return of COVID-19 to the SAR and the following shutdowns are already forcing a transition where gamblers go to get their casino fixes.

Because of the ongoing issues, Macau’s casino industry continues to suffer. JP Morgan analysts predict that gross gaming revenue for 2022 will only reach 19% of what it was in 2019. Other forecasts also paint a dismal picture.

As a result of the problems, forcing the introduction of a CBDC would only further hinder Macau’s recovery. China is going to require casino operators to make huge investments in Macau. However, the long-term revenue prospects may no longer be as appealing as before.