Stepping upon the path of India, China has begun to impose some serious capital controls and restrictions on cash. On December 8, the Chinese government officially halved the amount money UnionPay bank card holders can withdraw from ATMs in Macau, in an attempt to regulate the Macau gambling industry and prevent the devaluation of yuan.
According to SCMP, several billions of yuan are sent from Beijing to Macau on an annual basis, due to the massive expenditures of gamblers in the city. By restricting the daily withdrawal limit in Macau, the government hopes to see a substantial decrease in the outflow of the Chinese yuan.
The daily withdrawal limit cut from 10,000 to 5,000 Macanese pataca is set to take effect on Saturday, December 10. Considering that US$1.25 billion worth of Macanese pataca is withdrawn in Macau on a monthly basis, the withdrawal limit cut is set to decrease the outflow of the Chinese yuan by around $600 million.
Almost immediately after the report of SCMP, the stocks of casinos and hotels in Macau rapidly declined, with shares of Las Vegas Sands, Wynn and MGM falling by 13%, 12% and 7% respectively. The casino market shock is presumed to continue as the Macau gambling industry’s largest market, China, will see nearly a 50% decline in revenue.
If the Chinese government continue to restrict the outflow of Chinese yuan to large gambling industries like Macau, it is highly likely that gamblers and investors will begin to seek out for alternative assets or stores of value to bring outside of China.
At this time, two safe haven assets gold and bitcoin are the most viable alternative to cash. However, due to the physical properties of gold and the restriction of gold exportation, the only practical method of moving funds outside of China to Macau is bitcoin.
If at least 5% of investors and gamblers affected by the Chinese government’s crackdown on ATM withdrawals shift towards bitcoin, the demand for bitcoin will surge in local markets, thus pushing the price of bitcoin in China and in global markets.
The price of bitcoin has already begun to react to the initial market shock and capital controls in Macau and China, increasing from $766.8 to $772 within the past 24 hours.
A Macau finance industry official told SCMP that a similar situation as India is ongoing in Macau, as people have begun to line up in ATMs to withdraw 10,000 Macanese pataca at a time. The official confirmed that gamblers and investors are using “stacks of cards” to withdraw as much cash as possible.
“What has happened is that individuals are turning up at ATM machines with stacks of cards from individual account holders and are withdrawing 10,000 a time,” the official said.
While Beijing and the government is yet to respond to this situation, it is likely that the Chinese government will push for stricter regulations on cash withdrawals, which will further push the demand for bitcoin.