The potential introduction of China’s Digital RMB into Macau’s casinos could result in Beijing eventually easing its capital controls due to greater transparency around money flow, according to a Thursday note from brokerage Bernstein.
The prospect of Macau’s regulators allowing cashless gaming, with Digital RMB at its core, has been mooted for some time but has gained traction over the past year as China expands domestic pilot programs around the digital currency’s use.
Originally rolled out across four cities in April 2020 and another six in October of the same year, the People’s Bank of China (PBOC) announced that it was expanding the pilot program to 11 more cities from April 2022 as well as Beijing and Zhangjiakou City following the 2022 Beijing Winter Olympics.
Assessing the potential applications for Macau, Bernstein this week said, “If cashless gaming is adopted in Macau, China’s Digital RMB could become an essential part of the infrastructure and provide an edge to allow seamless implementation of large-scale cashless play.
“In the case of Macau, Digital RMB could potentially become a one-stop solution for both the casino and customers, dis-intermediate payment providers and simplify the process of currency and chip exchanges and eliminate any associated transaction costs.
“If Digital RMB becomes a legal tender in Macau, a mainland Chinese customer would be able to directly use Digital RMB for casino play without going through the usual process of converting RMB into HKD (Hong Kong dollar) cash and back again to RMB.
“While China’s capital controls may not be eased in the initial stages of Digital RMB introduction into Macau, in the longer term, with the transparency and traceable nature of digital RMB transactions, we see potential capital restriction relaxation as a governmental objective aimed at promoting cross-border RMB usage.”
Bernstein said the benefits of introducing cashless gaming and the Digital RMB to Macau’s casinos include boosting anti-money laundering capabilities, a frictionless and safer gaming experience and eventual relaxation of China’s strict cross-border capital controls given that all funds would be traceable.
However, it also warned that this may create a headwind to demand at the higher-end level of play and “discourage high gambling spending as Chinese customers may think their funds used for gambling will be ‘under surveillance’.”
Despite those concerns, the brokerage suggested that utilization of China’s Digital RMB should largely fit in with the government’s goals.
“A more transparent environment may lead to government loosening the restrictive measures and encouraging more mass play in Macau,” it said.
“The clearance of illegal money movement in the gaming industry will ultimately benefit the operators in the long run.”
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