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Digital Yuan threatens Macau’s gambling industry

The Digital Yuan will allow Beijing to control and track Macau’s gambling activities, though this might mean more tourists from the mainland

Macau, one of China’s special administrative regions, has decided to adopt the mainland’s central bank digital currency, the Digital Yuan, in a bid to counter money laundering in the region. However, reports suggest that the move could put at risk Macau’s flourishing gambling industry that contributed revenue of over 36 billion USD in 2019 alone.

Casinos have proven over the years to be Macau’s unique selling point in luring high rollers into the region. However, the industry has been under the microscope after Beijing launched a crackdown on the cross-border flow of funds for gambling, calling it a national security threat.

This led to a number of arrests in the region for illicit cross-border gambling as the privacy-focused financing channels used by Macau’s junket industry and the online gambling sector became illegal.

The crackdown also forced long-time customers to rush to withdraw their money from junkets, dumping a major liquidity problem on Macau’s pandemic-battered gambling industry.

A Central Bank Digital Currency is the digital representation of the fiat money issued by a country’s central bank to enable cashless transactions, speed up payments, and reduce associated costs. China’s digital yuan is anticipated to be the first digital version of a currency issued by a major central bank.

Along with advantages in security and tracking of transactions, the Digital Yuan will also represent a revolution in the way currencies will function, bringing an ever-growing number of people onto a digital banking platform.

However, industry executives believe that the launch of the CBDC in the gambling capital of the world will diminish any remaining avenues that casino operators could seek in order to stay in business after the crackdown.

“All these intermediary industries will be faded out or disappear right away, and this is a very likely possible outcome,” said Luiz Lam, an investor in the junket industry, of the digital yuan’s impact. The CBDC will also enable Beijing to impose a daily or annual transaction limit on casinos, if and when it wishes to do so.

However, considering that mainland China accounts for the majority of Macau’s tourists, executives hope that a fully traceable Digital Yuan will give Beijing the confidence required to allow more tourists to travel to Macau and hence boost the gambling industry in the long run.

Further, with a greater possibility to control money laundering and illicit activities, China might be more enthusiastic in supporting Macau to regain its footing post the pandemic. “If Macau cannot control the environment, China is not going to give us the tourists,” a casino executive said.

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