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DeFi – Find Out What's Happening in Macau on This Exciting Topic

Macau is an awesome place to host a conference. Often dubbed the Las Vegas of China, this tiny strip of land is a buzzing ecosystem resplendent with golden hotels, temples, and resorts. Returned to China since 1999, its Portuguese inheritance is very strong with Portuguese blue-framed houses sitting cheek and jowl beside Chinese temples. The people are friendly and the temperatures warm when we arrive for the 6^{th Finwise conference in the region – this time theme is DeFi or decentralized finance.}

The summit was co-hosted by Mike Costache (Co-Chairman & CEO of FinWise Global and Managing Partner of TaaS Capital), Eric Gu (Co-founder & CEO of DualChain Network Architecture and founder & CEO of Metaverse Foundation, the first Chinese ICO back in Aug 2016) and Hao Zeng, Co-founder & CEO of Ant Node Alliance, a leading blockchain marketing company in China.

Flying into Hong Kong is also without trouble – no protestors airside. Returning home is the same as the ferry between Hong Kong and Macau is all airside: handy to know in these interesting times.

DeFi is a growing meme in the blockchain world. The term emerged some eight months ago but it is still very nascent in this industry. A nascent meme in a nascent industry.

DeFi has a number of primary features. It is permissionless and anyone can access it with a smartphone and an internet connection, thereby removing traditional barriers to finance: notably wealth, geography and location inhibitors. It is decentralized and less prone to hacking. It is censor resistant: transactions in a Defi world cannot be changed, reversed or stopped. This is crucial when living in countries where either inflation has gone through the roof or government governance is compromised.

It is transparent and private allowing users to fully control their own money and transact freely. It is also programmable resulting in low-cost financial services.

The conference was hosted by Brad Pitt film Double, the charming Rob O’Malley along with his Chinese colleague Emma Lee. The conference was also bilingual with simultaneous AI translations of the presenters into both languages; sometimes with unintended comic results.

Hosted by Mike Costache, the DeFi conference was certainly ahead of its time. Notable speakers included local hero Eric Gu, Alex Lightman, Eddy Travia, Franklin Urteaga, Rossco Paddison, Oliver Yates, Paul Murphy, Hans Lombardo, Dan Schatt, Ruslan Gavilyuk, Alexi Lane and Alexander Alexandrov.

There were live video link-ups with Brock Pierce and Tone Vays. Technology being technology these were glitchy. Perhaps the next time it might be better to pre-record a short video and have a live Q&A afterward.

There were plenty of selfie opportunities as the largely Chinese audience were keen to be snapped with any caucasian subject. As events go, I did feel pretty important by the end as queues of people waited patiently to have their picture taken with me.

The venue was the JW Marriot in the Galaxy Mall. Think end to end designer shops wrapped around a casino. The auditorium was laid out in classroom seating and held upwards of 1000 people. The audience was very vocal during talks, often prompting loud grunts of positive assertions.

I moderated one panel with the interesting topic of Crypto Banking as a service – Will DeFi prevent the next financial crisis? I was joined by a lively bunch of debaters – and got off to a heated start with Alexi Lane declaring he would not put his money in a bank at all. Dan Schatt went on the offensive to say that we were on a continuum and that traditional finance would merge into DeFi over time. Vadim Pushkarev, as befits the token Russian on the panel, spoke up of revolution and said that we were in the middle of one. Ruslan Gavrilyuk spoke of institutional investors driving the services forward – or sideways depending on your viewpoint, while David Wang opted for regulation in line with current best practices.

The 30 minutes were over in a flash but we all reckoned there was still a new financial crash happening despite the best efforts of DeFi.

However, the best takeaway comment of the conference has to be from Rossco’s panel when he compared the current market as akin to the period after the dot com crash. He pointed out that there is an inflection point that happens – which we forget time and again – where we hit a topping point and what is only imaged now becomes reality.

Welcome to the world of Defi.

Image via Shutterstock

Blockchain Allowed 17 Million People to Travel Between Macau and China During Coronavirus

Despite the coronavirus (COVID-19) pandemic bringing the travel industry to a standstill, a blockchain-powered QR health code system has enabled at least 17 million people to travel between China and Macau, an autonomous region off the south coast of China, since May.

Mutual healthcare network

China’s southern Guangdong province and Macau have been using a mutual QR health code network powered by blockchain technology to aid travel between the two regions as COVID-19 has jeopardized travel worldwide.

The system has empowered both sides to authenticate travelers’ health status without directly exchanging personal data. As a result, ensuring that the local privacy laws are followed.

As per the announcement:

“Health authorities in Chinese mainland and Macau need to verify the health information submitted by users crossing the border and yet they are not supposed to exchange data directly with each other to stay in compliance with their corresponding regulations.”

Aiding cross-border travel

The health code system is developed by WeBank, a fintech developer associated with Chinese internet giant Tencent Holdings, and FISCO BCOS, a Chinese open-sourced blockchain platform.

Blockchain is instrumental in encrypting the personal health information and identification of travelers. As a result:

“Health authorities on both sides are able to verify whether travelers are in good health and have been in contact with any known Covid-19 cases without actually accessing personal data, thus complying with privacy regulations on both sides of the border that prohibit the direct exchange of such information.”

The travel sector has been among the hardest hit by the coronavirus pandemic. Nevertheless, blockchain technology is continuously being adopted to help this industry stand back on its feet.

For example, Hainan, a southern island province of China, is keeping a watchful eye on a blockchain-enabled points reward program aimed at promoting tourism in the region. It intends to utilize the blockchain-based system to get back on track in the tourism sector following disrupted travel triggered by the coronavirus (COVID-19) pandemic.

China’s Digital Yuan Launch Could Threaten Macau’s Gambling Industry

Gambling companies in Macau are exiting the industry or have already started diversifying their operations away from the city. They say that the gambling industry is in danger if China’s digital yuan is fully implemented across the nation. The industry’s revenues have already been affected by stricter regulations and the COVID-19 pandemic over the past few years. The city of Macau has experienced a drop of revenues by $27 billion this year as COVID travel curbs kept lucrative Chinese gamblers away.

While visitors are slowly returning, gambling operators see China’s intention to launch the much-awaited state-backed cryptocurrency, digital yuan, as a potentially greater threat to the casino industry in Macau, which is the largest gambling hub in the world.

This comes after Macau gaming regulator, the Gaming Inspection and Coordination Bureau, approached a number of casino operators to discuss the possibility of replacing Hong Kong dollars with the use of digital yuan in purchasing gambling chips. The discussion has sent shock waves among gambling operators in Macau. Hong Kong dollars’ relative anonymity has been playing a key role in the operation of Macau’s gambling industry.

However, if digital yuan is implemented, then this would imply that Beijing would have complete visibility and control of financial flows in Macau, which is known for its lax regulatory system for its casinos. The U.S State Department has recognized the city as a money laundering hotspot.

High-roller Chinese gamblers may shy away from using the Macau casino junket system, which in the past has been linked to money laundering activities. The role of junket operators normally involves arranging hotel stays, private jets, and other accommodation and support services to high-roller gamblers for betting in Macau’s casinos.

Macau junket operators are, therefore, assessing options to counter threats facing revenue generations in the gambling industry. Some small operators have already given up completely. For example, Eric Leong, who has been providing junket services to Chinese gamblers for decades, exited the gambling industry this year and has begun import and distribution of consumer goods such as luxury bags and cosmetics.

Leong thinks that if the digital yuan is implemented, then it would ruin Macau’s gambling industry. He stated: “Everyone in this industry is trying to survive however they can. If the water is too clean, there’ll be no fish. The big gamblers will go away if casinos need to be that transparent.”

Furthermore, an associate professor at the Centre for Gaming and Tourism Studies in Macau Polytechnic Institute, Zhou Jinquan, talked about the potential impact of the CBDC on gambling in Macau. Jinquan said:

“If applied widely, the digital yuan will…breach customer privacy and restrict people’s betting amount to the potential conversion cap imposed on the digital yuan to foreign currencies.”

Macau-linked shares declined in trading because of the fears associated with the new rise of digital yuan usage. On Wednesday, December 2, Galaxy Entertainment Group Limited, which has one of the largest shares of high-rollers revenue among casino operators in Macau, declined more than 3%. Suncity Group Holdings Limited, another big junket operator in Macau, fell as much as 2.8%. Wynn Macau Limited and SJM Holdings Limited also declined as much as 2.5% and 1.4% respectively.

While Macau and Hong Kong are two special administrative regions of China, Macau city is the only part of China where gambling is legal. Gambling is one of the major industries of the city. More than 58,000 people are employed in the gambling and gaming industry and almost 98% of them are working in casinos. In Macau, Casinos contribute revenues of around $45 billion as 66% of all revenues generated by casinos made from high rollers. As China is accelerating the digital yuan pilot program in major cities, the introduction of the CBDC would clearly have an impact on Macau’s junket industry.

Macau Likely to be Test Bed for China's Digital Yuan: Reuters

Macau is expected to be a testbed for China’s digital yuan, also known as the e-CNY, as casino owners prepare to bid for new licenses in the city for the first time in two decades.

Chinese regulators will be looking forward to using the casino licensing opportunity to test the digital yuan in 2022, Reuters reported.

Among many other casino companies in Macau, Sands China and Wynn Macau have shown eagerness to participate in the government’s plan.

The government authorities have also pitched ideas like appointing agents to supervise daily casino operations, according to Reuters.

Last November, when central bank governor Yi Gang suggested China’s newly developed cryptocurrency could be useful for fighting crime such as money-laundering and resolving complex cross-border payments problems, Macau might have been one of the places in mind.

In December, junket operator Suncity’s boss Alvin Chao was implicated in a probe into illegal gaming, forcing his casinos to be completely shut down. Suncity facilitated bets for wealthy VIPs, a market segment worth around $8 billion in gaming revenue the year before COVID-19 struck, Reuters reported.

Using Macau as a testbed for digital payments would benefit Beijing’s desire for greater oversight of cash flows and customers and since the casino hub is situated outside Chinese capital controls, the city is considered an ideal place to test the technology before rolling it out more widely in the mainland.

According to Bernstein analysts estimate, the average high roller lost over $27,000 on each visit to the tables in Macau.

A senior Chinese central bank official said that some 140 million people had registered “wallets” for the new digital yuan as of October and used it for transactions totalling around $9.7 billion, according to a Reuters report from November 2021.

Although 2022 is likely to be the year for e-CNY, no official launch date for the digital currency has been announced yet.

Since China’s ban of decentralised cryptocurrencies like Bitcoin, the digital yuan is predicted to substitute them.

According to a Blockchain.News report, China implemented its zero-tolerance policy for Bitcoin mining in May 2021, with a series of crackdowns on miners that finally led to the exodus of mining firms from the Asian nation. Beijing’s negative stance about crypto miners is fueled by the supposed environmental impact as the majority of the nation’s power source comes from coal.

Eventually, Chinese miners found the right footing by relocating to other areas like the United States.