Football clubs dive into wild world of cryptocurrencies

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Cryptocurrency may not seem like an obvious next step for Brazilian footballer Ronaldinho Gaúcho. But the former Barcelona star, who retired at the start of the year, has been busy promoting his own “digital gold”, the Ronaldinho Soccer Coin, to his 18m followers on Twitter.

The RSC project, which has been developed by Malta-based company World Soccer Coin, will issue as many as 1bn digital tokens for about 25 US cents each. The funds raised from investors will go towards projects such as developing an esports gambling business and donating football merchandise to underprivileged children, its website says. Neither Ronaldinho nor World Soccer Coin could be reached for comment.

The project is just one of a growing number of tie-ups between the world’s most popular sport and the freewheeling cryptocurrency industry.

In recent months, a number of big football clubs, including Arsenal, Tottenham and Paris Saint-Germain, have agreed sponsorship deals with cryptocurrency companies or to promote “initial coin offerings” — where companies sell their own digital tokens, to raise money.

For cryptocurrency groups, celebrity endorsements provide an easy way to reach global audiences. Deals with football clubs — where companies can place their branding prominently on team shirts or around stadiums — helps attract retail investors and raises the sector’s profile.

But watchdogs around the world are keeping a wary eye on crypto and have warned that people risk losing all their money in a loosely regulated market that is vulnerable to wild fluctuations and fraud.

“The same 18- to 45-year-old affluent or emerging affluent individuals who attend sporting events are the same people with interest or curiosity . . . for novel forms of investment,” said Javier Paz, managing director of research company Forex Datasource.

“Unfortunately, this demographic group also tends to lack in sophistication to tell fact from fiction in both investment or crypto matters,” he said. 

Simon Chadwick, a professor of sports enterprise at the University of Salford, said that “many people in football actually don’t understand” the crypto sector. 

“It does raise an issue of governance in football, as well as issues of due diligence, ethics, morality and integrity. The industry is so focused on signing talent . . . that there is a tendency to bypass what might otherwise be deemed acceptable governance standards.”

Members of the public flocked to cryptocurrencies as their values rocketed in December last year. But prices have since fallen to 10-month lows in a sell-off that has burnt many small investors.

There are also mounting concerns about the growth of ICOs. Advisory firm Satis Group reported that ICOs raised $3.4bn in the first quarter of 2018 but, in its view, only 5 per cent of those could be deemed “promising” or “successful”, while most of the rest appeared to have been fraudulent.

In recent years, a number of football clubs have agreed sponsorship deals with spread betting and foreign exchange brokers that offer risky products that can result in steep losses for customers, even as European regulators moved to clamp down on the industry.

But, with new restrictions in force as of this summer, some European clubs have now turned to the cryptocurrency sector.

In August, seven English Premier League clubs — including Newcastle United, Leicester City and Tottenham Hotspur — signed one-year marketing partnerships with eToro, a website that offers cryptocurrency trading. As part of the partnerships, the clubs received payment in bitcoin.

Meanwhile, Wolverhampton Wanderers has agreed a partnership with Coindeal, a Cyprus-based cryptocurrency exchange and Arsenal has signed a deal with CashBet of the US. And individual football players, including Barcelona’s Lionel Messi, Andrés Iniesta and Carles Puyol have all become brand ambassadors for crypto ventures.

Some clubs are even launching their own ICOs. Last month, Paris Saint-Germain, the French league champions, announced it was creating its own cryptocurrency in partnership with another Malta-based group, Socios.com. 

Socios will develop a “fan token offering” which PSG supporters will be able to buy and trade for special privileges, such as voting on man of the match awards. Socios hopes to generate between $15m and $20m for PSG in this way. Brazilian Series B football club Avaí FC has launched a similar token in a bid to raise as much as $20m.

Marko Filej, co-founder and chief executive of SportyCo, a sports investment company that uses the blockchain technology that underlies cryptocurrencies, said that clubs were intrigued by the opportunities that cryptocurrency and blockchain offered, including as a way to “have much closer relationship with their fan base”. SportyCo is involved in a bid to buy Hull City football club.

Still, some remain wary, particularly because regulation is patchy. Many jurisdictions are still working out how to police the crypto sector, although some, such as Malta and Gibraltar, are tailoring their regulation to attract business. 

The EU markets regulator told the Financial Times that it would not single out a particular industry for their involvement in ICOs, but reiterated that it had previously “highlighted the risks for investors related to these types of products”. 

Google, Facebook and Twitter have all restricted cryptocurrency-related advertising this year.

A senior executive at one of England’s leading football clubs said they had been approached about endorsements several times over the past year, but had so far refused because of worries about the lack of regulation and the potential for reputational harm. 

“The danger is that a [football club] endorses an ICO, lots of unsophisticated investors lose a lot of money when it dies and the only reason people have invested in that is because their sports team has promoted it,” the executive said.

“We don’t want to wake up tomorrow and see loads of our fans losing money on a product that we have been endorsing.”

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