Casino revenue faces headwinds from China’s crackdown on money exchangers

Macau’s June gross gaming revenue (GGR) fell 12.4% sequentially, impacted by a crackdown on illegal money exchange networks and the ongoing Euro 2024 soccer tournament, according to a Monday note from Seaport Global Securities LLC. The decline in revenue reflects the challenges facing the gambling hub as Chinese authorities intensify efforts to curb the use of cryptocurrency and money laundering.

The crackdown, which began in early June, targets money changers and their networks, many of whom utilize cryptocurrency for money transfers, according to analyst Vitaly Umansky. The crackdown has also targeted loan sharking activities. “Many of these networks utilize cryptocurrency for money transfers – something that has gained wider attention by authorities in China – along with loan sharking activities,” Umansky wrote.

The crackdown is part of a broader effort by Chinese authorities to curb the use of cryptocurrency to move money out of the country. “This problem has been raised to a national level in conjunction with China authorities looking at the continued use of cryptocurrency to move money out of China, not necessarily tied to Macau,” Umansky said.

The Euro 2024 tournament, which began on June 14, has also negatively impacted Macau’s GGR, according to Umansky. “Macau revenue has historically been negatively impacted by large football tournaments – UEFA [Euros], [FIFA] World Cup,” he observed.

Despite the headwinds, Seaport forecasts Macau’s July GGR to be around USD2.39 billion, a 9% increase from June. “July is typically a solid month with base mass visitors increasing later in the month and more so in August,” Umansky said. “With the softness in base mass, the continuation of the Euro Cup and the crackdown on money movement activity, we are more conservative on July than normal.”

However, Deutsche Bank Securities Inc. expects Macau’s July GGR to be slightly lower, at just under USD2.43 billion, a 20.7% decline relative to July 2019. This suggests that the challenges facing Macau’s casino industry may persist in the near term.

While the crackdown on money changers has had a short-term impact on Macau’s GGR, Umansky expects the situation to improve in the medium term. “We expect the crackdown to soften and liquidity in Macau to be not significantly impacted in the medium term,” he said. Victoria Chan