e-MOP: New Macau’s casino coin of the realm? By António Lobo Vilela

 dez24

The shift towards electronic payments is both clear and inevitable. The COVID-19 pandemic has accelerated a change in payment habits, pushing people towards digital and contactless payments and e-commerce. This transformation was partly driven by concerns that handling cash could spread infection, a notion that has since been debunked. As a result, the use of cash has continued to decline. According to data from the Monetary Authority of Macau (AMCM), e-payment transactions in Macau (including apps such as MPay and card payments) hit MOP$7.6 billion (US$948 million) in the third quarter of 2024, totalling 88.1 million transactions. In comparison, during the first quarter of 2020, these transactions amounted to MOP$ 825 million (US$102 million) across 8 million transactions.

The advancements in e-payment technology are truly remarkable. A notable example in Macau is the introduction of palm-recognition technology through Tencent’s Weixin Palm Pay service. This innovative technology allows customers to make payments at select stores by simply placing their palms over a scanner, utilising WeChat Pay.

To keep pace with mainland China—which launched the Digital Yuan (e-RMB) as the first digital currency issued by a major economy and recorded a total transaction volume of e-RMB$7 trillion (US$967 billion) in June 2024 (nearly four times the e-RMB$1.8 trillion (US$249 billion) recorded in June 2023)—and Hong Kong, which initiated its digital currency pilot program (e-HKD) in 2023, the Macau government is collaborating with the People’s Bank of China’s Digital Currency Research Institute to develop a digital currency for Macau. It plans to unveil its prototype featuring ‘basic functions’ during a public demonstration on the occasion of the 25th anniversary of Macau’s handover. According to authorities, the Bank of China Macau Branch will serve as the operating entity in the initial stage of the e-MOP, responsible for developing and testing the system’s customer portal. This suggests that the Macau government will depend on an affiliated financial institution or institutions (if BNU is also considered) to ‘manage’ the digital currency.

Macau’s future digital currency—e-MOP—is a Central Bank Digital Currency (CBDC) issued by AMCM, which acts as Macau’s de facto central bank rather than a commercial bank. It is a government-backed digital version of the traditional pataca, fully supported by a 100% reserve and with legal tender status. In 2023, Macau enacted a new law on monetary issuance that recognises digital currency as legal tender alongside traditional forms of money such as banknotes and coins. Like traditional currency, e-MOP functions as a means of payment, a unit of account, and a store of value, with each unit uniquely identified to prevent counterfeiting. It can be stored, transferred, and transmitted through various payment services and systems. Unlike cryptocurrencies, CBDCs like e-MOP are centrally controlled, seizable, and not subject to volatility.

Most countries are developing CBDCs. Six central banks have implemented functional CBDCs: the Bahamas (Sand Dollar), the Eastern Caribbean (DCash), Nigeria (e-Naira), Jamaica (JamDex), China (Digital Yuan), and India (Digital Rupee). An example of an unsuccessful CBDC attempt is the United Kingdom’s Britcoin, active from 2011 to 2019.

Digital currencies aim to overcome the challenges of using physical cash. CBDCs benefits include enhancing existing financial networks (they enable real-time transfers and payments directly from payer to payee, reducing transaction fees by eliminating intermediaries), assisting in promoting financial inclusion (they can expand access to financial services for the unbanked (for example, 6% of adults in the U.S. lacked a bank account in 2023), preventing illicit and fraudulent activities (their traceability aids in monitoring fraud and tax evasion), combating crime (transaction visibility helps in detecting criminal activities), financial safety (CBDCs are zero credit risk and are considered high-security assets, reducing concerns over bank failures or bank runs), and improving policy implementation (they support regulatory compliance and effective macroeconomic policymaking).

Additionally, the use of CBDCs may deter the ability to sell user data.

However, CBDCs could pose certain risks such as banking disintermediation (depositors would shift out of the banking system, weakening the financial stability of commercial banks), centralisation (CBDCs might lead to a more centralised financial system, reducing competition and hindering innovation), privacy issues (governments may be able to monitor financial transactions, raising concerns about surveillance), cybercrime (by providing a new payment method, it would making it high-value target to cyber-attacks and increase vulnerabilities within the financial system), and the ability of social manipulation (authorities might have the power to restrict purchases, potentially threatening consumer freedom).

While the pataca is the official currency in Macau, the Hong Kong dollar has become the primary currency used for transactions in casinos over the past few decades. This is primarily due to a shortage of physical patacas for betting at gaming tables. To provide some context, the Macau government’s forecast for gross gaming revenues in 2025 is MOP$240 billion (US$29.9 billion), translating to around MOP$8 trillion (US$998 billion) in total bets at these tables (considering a casino win of 3%)

Once fully implemented, it would be natural for the Macau government to designate the e-MOP as the official casino currency. Moreover, the potential interlinkages between the e-MOP, e-RMB, and e-HKD to facilitate cross-border payments (and capital flows within the Greater Bay Area) so dictates.

Casino gaming operators should welcome the adoption of digital currency, as it streamlines transactions, reduces the influence of shadow banking institutions, and addresses concerns about counterfeit and dirty money.

Casino gaming operators should welcome the adoption of digital currency, as it streamlines transactions, reduces the influence of shadow banking institutions, and addresses concerns about counterfeit and dirty money (…) However, the introduction of e-MOPs is likely to impact Macau’s casino industry significantly. Players may resist this change due to privacy concerns. Payment data can reveal sensitive aspects of a person’s behaviour, which is particularly problematic in the casino sector

However, the introduction of e-MOPs is likely to impact Macau’s casino industry significantly. Players may resist this change due to privacy concerns. Payment data can reveal sensitive aspects of a person’s behaviour, which is particularly problematic in the casino sector. The traceability of the e-MOP and the potential intrusion by authorities to monitor financial activities—aimed at combating money laundering and terrorism financing—could unsettle players who prefer to remain anonymous while gambling and want to avoid showing any signs of wealth. Since a significant amount of gambling traffic in Macau originates from mainland China, some gamblers may decide to place their bets elsewhere.

The objectives of the Macau Gaming Law, as amended in 2020, include controlling cross-border transactions and curbing money laundering and terrorism financing. The introduction of the e-MOP would help regulate the flow of capital from mainland China and reduce questionable transactions. Additionally, it would protect players by identifying and intervening in cases of problematic gambling, promoting responsible gaming practices.

VIP gaming volumes have declined due to mainland China’s enforcement against cross-border gambling and illegal money changers. Introducing the e-MOP as Macau’s casino currency would target both the VIP and mass market segments and signal a significant shift in the industry—similar to the “disappearance” of casino gaming promoters. This change will surely disrupt the traditional operational methods of Macau’s casino industry.

All regulations aim to balance risk, cost, reward, and effectiveness. Implementing a CBDC requires a complex regulatory framework that addresses several key factors: privacy—a significant motivation behind cryptocurrencies—consumer protection, and robust Anti-Money Laundering standards. These elements must be established before adopting the e-MOP.

Is Macau ready to implement a CBDC while maintaining direct control over the data? Does the regulatory framework have the capability to monitor such a significant system, especially considering that security breaches or cyber-attacks—similar to those experienced by Mt. Gox, KuCoin, and Binance—could significantly undermine user trust? What role does AMCM play in this context?

Engaging with the global digital economy or embracing what the Macau authorities call ‘modern finance’ comes with considerable costs.

e-MOP: New Macau’s casino coin of the realm? By António Lobo Vilela

https://www.macaubusiness.com/opinion-e-mop-new-macaus-casino-coin-of-the-realm/