Macau poised to amend laws to enable digital yuan trials
Macau’s government is taking steps towards introducing a digital currency to combat tax evasion and money laundering in the gambling hub.
Macau is pushing forward with preparations fo the roll out China’s digital yuan, which could help crack down on tax evasion in its opaque gambling industry.
On April 13, Ho lat Seng, the chief executive officer of the Chinese island territory, told local lawmakers the government is planning to amend legislation that would allow the regulated issuance of China’s digital yuan to facilitate trials of the digital currency:
“We will keep communication with the People’s Bank of China and start a feasibility study around launching the Digital RMB in Macau. Therefore, we need to add provisions in relevant law to allow for the introduction of digital currencies.”
According to Ho, the introduction of digital currency will aid Macau in its fight against tax evasion and money laundering. The introduction of the digital yuan could potentially overthrow Macau’s pataca as the main currency, especially if authorities decided to make its use mandatory.
Analysts at brokerage firm Sanford C. Bernstein emphasized the increased government scrutiny that monetary flows in China’s Digital RMB will face:
“Digital RMB would allow greater government scrutiny and control over money flows. But it would also allow easier money transfer.”
Junkets are middlemen who provide Hong Kong dollar conversions and credit lines for high rollers in Macau. They reportedly hold concerns over the adoption of China’s fully traceable digital currency and believe the move could scare off high rollers, some of whom have alleged underworld ties, to other jurisdictions. This may do significant harm to a gambling industry already reeling from the impacts of travel restrictions induced by the global pandemic.
It is reportedly difficult for the Chinese and Macau governments to track taxable revenue in the industry, but according to Reuters, gambling revenue hit $36.5 billion in 2019, with the junket industry responsible for 50%.
Despite their concerns, others believe the adoption of China’s digital yuan could help with Macau’s road to recovery. Victoria White of Inside Asian Gaming noted on April 2, that the adoption of the digital yuan could facilitate the movement of money for the large number of Chinese tourists who travel to the gambling hub each year, as it removes the need for currency exchange and its associated costs:
“Ultimately, this could boost overall consumer spending in the mass and premium mass markets, which are the precise segments that have been most affected by the drop in footfall and visitations since the start of the COVID-19 pandemic.”
The PBoC has conducted pilot trials of the digital currency in several cities across China since late 2019. It is exchangeable on a one-to-one basis with the yuan at some ATMs. While a digital currency is nothing new for an already relatively cashless economy, aided by the use of apps such as WeChat and Alipay, the move into a nationally recognized virtual currency increases the CCP’s ability to monitor its citizen’s financial activity.
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Author: Brian Quarmby