Macau Plans Prototype Digital Dollar Mirroring Beijing’s Digital Yuan by Year-End

Macau will develop a prototype “digital Macau dollar” by the end of the year, according to the Special Administrative Region’s (SAR) monetary authority. The currency is likely to mirror the “digital yuan,” officially known as Digital Currency Electronic Payment (DCEP), which was cautiously introduced on the mainland in 2020. This means it would be backed by the People’s Bank of China and controlled by the central government in Beijing.

“To ensure the security and stability of Macau’s monetary system, the AMCM will conduct sandbox tests with the prototype system to explore the application scenarios of the Digital Macau Dollar,” the authority stated. It will also carefully assess various types of risks to formulate complementary rules and regulations that suit Macau’s market conditions and to properly prepare for the official launch of the Digital Macau Dollar.

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China was the first major economy to create its own digital currency, which is still undergoing public testing. Some regard this as the groundwork for a future cashless society, possibly allowing for increased government control and surveillance over users and their financial transactions. The introduction of a traceable, government-linked currency could impact Macau’s gaming sector by giving Beijing oversight over the casino economy’s cash flows, making it harder for visitors to bypass controls on money movement from the mainland.

Currently, there is a $50,000 annual cap on the amount of cash citizens can take out of mainland China. Beijing has been cracking down on money laundering and capital flight, focusing on Macau’s casino junket industry and illegal money-exchange businesses. It’s estimated that up to $600 billion is taken out of the Chinese economy by Macau-bound gamblers each year.

The People’s Bank of China has stated that the digital yuan aims to reduce money laundering, gambling, corruption, and terror financing, potentially improving financial transaction efficiency. However, it has also asserted that the goal is not to replace cash entirely.

While a digital economy could decimate the VIP segment on which Macau once relied, it might also fulfill Beijing’s long-standing goal of eliminating capital flight, potentially abolishing the need for capital controls and increasing the spending power of mass-market visitors to Macau casinos.

Macau is set to welcome a new political leader in October. Sam Hou Fai, the enclave’s former top judge and the first chief executive of Macau to have been born on the mainland, is expected to reinforce the strong political ties between the gambling hub and Beijing. Sam has expressed the opinion that the casino industry needs to “reform and innovate” if Macau is to meet its political and economic challenges.