Macau's digital transformation: roadmap heralds ‘new era’ of financial innovation
The introduction of the e-pataca is just one of several measures signifying Macau’s move away from a focus on the gaming industry, say Daniel de Senna Fernandes and Bruno Almeida of Riquito Advogados
Macau SAR is embarking on a significant journey of digital transformation. Driven by the Development Plan for the Appropriate Diversification of the Macau SAR Economy (2024–2028) (the Development Plan), the city aims to leverage technology to diversify its economy, enhance public administration efficiency, and foster a more inclusive and sustainable future.
The 1+4 strategy: a framework for digital transformation
The ‘1+4 strategy’ is outlined in the Development Plan and serves as the overarching framework for the diversification of Macau's economy, to be built on five key pillars:
Integrated tourism and leisure – the development of a diversified tourism industry beyond gaming, promoting cultural immersion, smart-tourism solutions, and eco-friendly initiatives;
Financial diversification – the creation of a vibrant financial ecosystem beyond gaming, fostering sectors such as healthcare, technology, and MICE (meetings, incentives, conferences, and exhibitions);
Technological leap – upgrading infrastructure, nurturing tech talent, and fostering innovation through startups and cutting-edge industries;
Empowering people – prioritising digital literacy, STEM (science, engineering, technology, and mathematics) education, and reskilling programmes to equip citizens for the digital age; and
Smart and sustainable city – encouraging the adoption of green technologies, smart infrastructure, and inclusive urban planning into the fabric of Macau.
Financial diversification and regulatory innovation
Committed to accelerating the development of a modern financial industry, the Macau government stated in its Government Action Plan for the 2024 Financial Year that it will, inter alia:
Prioritise bond market growth through improved capabilities of the Central Securities Depository System;
Further improve financial laws and regulations, including drafting a Securities Law;
Continue improving the cross-border financial management project, enhancing the systems put in place in recent years, such as the Easy Transfer fast payment system and its real-time gross settlement system for Hong Kong dollars payments;
Consider tax incentives to attract the incorporation of more asset management companies; and
Consider the introduction of digital currency into the monetary system and the development of new financial sectors.
Aligned with the 1+4 strategy, the Financial System Act and the Legal Framework for Currency Issuance were amended in 2023 by Law 13/2023 and Law 10/2023. While the former modernises Macau’s financial ecosystem, long overdue for an update, the latter establishes the digital Macau pataca (the e-pataca) as legal tender, embracing Macau’s digital ambitions.
Macau's pataca entering the digital era as a central bank digital currency (CBDC) holds transformative potential. This innovation can significantly enhance financial inclusion, boost efficiency and transparency (favouring the implementation of anti-money laundering and countering the financing of terrorism policies), and create new waves of possibilities. A CBDC allows payments to be processed directly between parties, bypassing mobile payment intermediaries and streamlining financial operations, which results in faster settlement times, increased transparency, and reduced costs, paving the way for a more dynamic and innovative financial future.
In a similar fashion to the digital form of the renminbi (the ‘e-yuan’), the introduction of the e-pataca most likely would not replace the physical form of Macau’s pataca but instead complement existing cash and mobile payments for the time being.
Law 13/2023 and Law 10/2023 build a more intricate e-commerce and digital payments ecosystem, paving the way for fintech advancements. The cornerstone of this framework, the new Financial System Act, establishes essential regulations and, crucially, introduces a "banks with restricted activity scope" licence.
This licence carves out a dedicated niche within the financial landscape, which is distinct from the comprehensive scope of traditional banking licences. While the latter encompass deposit- taking and a broad range of activities, the new licence restricts institutions to specific functions such as deposit-taking, loan provision, investment services, credit card issuance, and/or foreign exchange transactions.
Though seemingly minor, the introduction of this licence type is a game-changer, allowing new types of financial institutions, such as digital banks, to enter the market. This diversification fosters a more dynamic and adaptable financial landscape, driving innovation and benefiting businesses and individuals.
As the digital ecosystem evolves, so must cybersecurity measures. While the creation of the Cybersecurity Coordination Centre marks a crucial step in Macau's digital transformation, it is just the first line of defence. Robust data privacy and security frameworks, coupled with international collaboration, will be essential to protect individuals, businesses, and critical infrastructure from the ever-growing threat of cyberattacks.
A bold roadmap for change in Macau
Emerging from a historical focus on gaming, Macau's digital transformation journey is not merely about catching up; it is about crafting a unique digital identity. The 1+4 strategy lays out a bold roadmap, prioritising not just economic diversification but also equitable access, technological leapfrogging, and a sustainable future.
With its revised legal framework, Macau welcomes a new era of financial innovation, empowered by new financial players and the potential of the e-pataca.