UnionPay, the only bank card that can be used for payments in China, has the made the movement of yuan- both inside and outside China, much easier.
Maintaining a low profile in earlier years, the card has quietly crept up to become second in the world when it comes to transaction value, during the first half of last year: Visa came in first with $4.6 trillion, UnionPay with $2.5 trillion, according to data from the Nilson Report. It is also now the most widely circulated card in the world, with 3.53 billion cardholders in 142 countries.
Its rise to prominence in China came mostly as a result of the Chinese central bank requiring all card issuers, whether domestic or foreign, to process yuan-based transactions through UnionPay. The decree was part of a bid to have the yuan become more of a universal currency throughout the world. It has been largely successful in doing so, surpassing the euro as the second most used currency for trade.
Reuters also reports that the card has come in useful for those looking to smuggle large amounts of money out of the country. Conventionally, the daily limit is 20,000 yuan ($3200).
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The neighboring administrative region of Macau has become a focal point for working around this limit. It has become the world’s largest gambling center, with revenues seven times bigger than those of Las Vegas. So it’s only natural for it to serve as the hub for getting as much cash out of its parent as possible.
There is an abundance of merchants like jewelry dealers and pawn shops which will simply let you purchase a substantial amount of cash if your UnionPay card, with the receipt noting the merchandise as “general sale”. In fact, according to a report by the Macau Monetary Authority, there was a 50% spike in the number of UnionPay transactions year-over-year, and 90% of those transactions were “highly concentrated in jewelry, ornament and luxury watch sales”. At one shop, staff said customers come to buy gold bullion worth as much as 10 million yuan ($1.5 million) and then trade it back for cash.
As to why authorities allow this to carry on, one theory has it that curbing the practice can send shockwaves through Macau’s gambling-dependent economy. The region brought in over $45 billion worth of gambling revenues, and 40% went to the government as taxes. Indeed, 80% of city revenues are generated from the gambling industry alone.
Prior to UnionPay, cash was far more prominent in China with electronic payments at a relatively underdeveloped and underused stage relative to other countries. It would be no wonder for something like Bitcoin to explode in popularity, especially since it also offered the perfect opportunity to skirt tight currency controls. Indeed, China is still the biggest player in Bitcoin when it comes to trading volume and fuelled much of the price run-up seen in the final quarter of 2013.
However, people are now finding other ways of getting around controls without having to resort to digital currency, with UnionPay. This, combined with China’s clamping down on Bitcoin, which cannot be said for UnionPay, may cool Chinese demand for cryptocurrency for the next little while. For those who get a kick out of Bitcoin for gambling purposes- whether that’s speculating in the coin’s value or using it toward real gambling- UnionPay is offering an attractive alternative.