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Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
Last year, Spanish striker David Barral made football history when his move from Real Madrid to DUX International de Madrid was paid for using Bitcoin.
While this was the first transfer deal to be funded in this way, the tie-up between football and cryptocurrency – a digital means of exchange of which Bitcoin is probably the best known example – was nothing new. In fact, commercial relationships between the pair have become increasingly common.
In 2018, seven English Premier League sides – Brighton & Hove Albion, Crystal Palace, Leicester City, Newcastle United, Southampton, Tottenham Hotspur and Cardiff City (now of the Championship) – linked up with the investment trading platform eToro.
The company described the partnership as “the first step in bringing the opportunity offered by Bitcoin and crypto assets to football.”
Italian job
The same year, Italian third division side, Rimini FC, became the first club to be bought using cryptocurrency when blockchain technology platform, Quantocoin, took a 25% stake.
Fast forward to last year, when Dutch first division side, AZ Alkmaar, revealed plans to become the first team to pay its players in Bitcoin.
So why are clubs and cryptocurrency specialists so keen to play ball together? The reason is simple: doing so provides much-needed revenue to one and all-important exposure and status to the other.
According to Uefa, European football’s governing body, the cryptocurrency sector has partly helped clubs to fill lost revenue streams – estimated at around €9 billion – that have been caused by the Covid-19 pandemic.
The cryptocurrency sector has invested heavily in sports sponsorship – and football in particular – to combat the perception that, despite being traded by millions of people worldwide and capitalised at billions of pounds, it is obscure and even murky.
In the UK, the Treasury has acted to improve consumer protection by decreeing that crypto firms will face stricter advertising rules. It said the UK’s financial watchdog, the Financial Conduct Authority, will be given oversight of most cryptocurrency promotions “in line with the same high standards that other financial promotions such as stocks, shares and insurance products are held to”.
Look before you leap
This month, the FCA has also published research that aims to help consumers think twice before jumping into high-risk investments like crypto.
In the latest highest-profile link-up between football and cryptocurrency, big-name football clubs such as Manchester City, Barcelona and Juventus, have been partnering with crypto platform, Socios.
The relationship enables clubs to issue so-called digital ‘fan tokens’ that can be sold to supporters and traded like other assets.
The tokens are akin to a club-specific cryptocurrency, allowing virtual coins to be bought and sold with their value rising and falling in line with supply and demand.
The tokens are often marketed with real-world perks such as promotions, rewards and discounts in the club shop. Juventus, for example, allows token holders to choose which song is played when the team scores a goal.
To buy tokens, supporters must first convert traditional funds, via an app, into Socios’ cryptocurrency, Chiliz.
Football clubs with fan tokens
Although the initiative has proved extremely popular – it’s thought that about $300 million worth of coins have been sold via the Socios app – the ride hasn’t been entirely smooth.
At the end of last year, for example, the UK’s advertising regulator banned two promotions for fan tokens from Arsenal football club, saying they were misleading supporters over the risks of investing in cryptocurrencies.
The Advertising Standards Authority rebuked the club for “taking advantage of consumers’ inexperience or credulity, trivialising investment in crypto assets, misleading consumers over the risk of investment and not making it clear the ‘token’ was a crypto asset”.
In response, Arsenal said it would seek an independent review of the ruling “to seek greater clarity on the ASA’s current position”.
Collectors’ items
In addition to fan tokens, some football clubs – including Manchester City, Juventus and Glasgow Rangers – sell digital collectibles widely referred to as NFTs, or non-fungible tokens. These are unique images and videos, akin to digital works of art, with built-in code proving ownership
In the summer of 2021, Juventus adopted NFTs as a tool for the collection of memorabilia. Its first NFT was a three-dimensional, high-definition replica of the team’s home shirt for the 2021/22 season, paying tribute to some of its famous players and featuring signatures from present members of the squad.
By partnering with some of the biggest brand names in sport, the cryptocurrency industry is gambling that its appeal to a mainstream audience will grow. But how sustainable the tie-up between football and the crypto sector ultimately turns out to be remains to be seen.
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
