We recently reported on the upcoming review of Macau's digital currencies legislation. The review was triggered by China's successes with their new digital currency.
Sands Corp is bullish on the new currency, according to the company's top officers. In their Q1 2021 Earnings Call, the transcript of which can be read on the Nasdaq site, the company's CEO and the VP of Global Gaming Strategy both addressed the topic when raised by caller Steve Wieczynski.
Wieczynski is an analyst at Stifel Financial Corp., a publicly listed investment bank. He asked about the "rumors out there about Macao potentially moving to a digital currency down the road at some point. To try to combat money laundering."
He asked the Sands Corp. folks: "Do you have any high-level thoughts around something like that being implemented? And [...] the impact you potentially could see across certain business segments?"
More yuan, more problems
The response was largely positive.
"Some people are concerned, we're not," said Rob Goldstein, CEO and Chairman of Sands Corp. "We think it's an additional form of liquidity into the market. It won't pre-empt other currencies. There are ways of having funds to gamble. But also, I think some of the problems we have in our industry are that we think that everything is done in Beijing. But they're actually thinking about casinos in Macao. [...] I don't think it's hurting Macao whatsoever."
Macao, like Hong Kong is a "Special Administrative Region" or SAR of China. This means it has its own currency (the Macanese pataca) and its own government (Macau Government). The Chinese government frowns on gambling. It is illegal on the mainland, and overseas gambling — including any gambling in Macau — is viewed as a potential security risk.
The fear is that Chinese nationals with gambling debts may be targets for overseas intelligence agencies. Another worry is that gambling moves renminbi offshore in ways where China would prefer more control.
The digital RMB might make things easier for Macau. Its highly traceable nature might give the Chinese authorities the confidence to loosen their FX restraints. These constraints created the grey market junkets on which Macau's high-roller rooms depend.
Junking junkets
Grant Chum, Senior V.P. of Global Gaming Strategy for Sands Corp, had a similar take to Goldstein's.
"I think it's a big and complex topic," said Chum. "It's really more about the digital currency strategy of China more broadly. And how Macao can fit into that. [...] Basically, this digital currency China has been looking at since 2014. Macao will also adjust and adapt in order to accommodate this broader strategy on digital currency. A prerequisite of that is also getting prepared in terms of amending the existing relevant legislation. So this is still an early stage process from the perspective of Macao."
Goldstein chimed in again, with a focus on Sands Corp's relationship with the junket industry. "I think the assumption has been by a lot of people, this is a negative thing. We view it as a positive as again, we would love to have more cross-currency and more cross-border currency. [...] Our business is not built on money laundering or on a necessary junket profile. We're looking to focus on the mass customer, premium mass — that's our bread and butter."
According to him, Sands is looking for "more visitation more penetration in China. More ways to get people to gamble and visit Macao is what we're looking for.[...] It may be a very positive thing for the Macao market as it becomes more traditional, more integrated into China, and more consumer-friendly, it will be very positive for us."
Macanese citizens, who have no doubt been watching China's "penetration" into Hong Kong, may have rather different views. But for the casino industry, the digital RMB could be the key to tying Macau closer to the Chinese mainland.
Featured image source: Flickr by Alexandr Zykov
