A group of MPs has cautioned that sports clubs may hurt their reputations if they release cryptocurrency fan tokens.
The Culture, Media and Sport committee are worried about the proliferation of non-fungible tokens (NFTs) and analogous assets in sports and the arts.
The committee cautioned clubs against taking advantage of fans.
The FCA have introduced new regulations in relation to crypto investments that necessitate firms to display a warning.
People should not put any money into an investment unless they are willing to accept the possibility that they could lose everything they have invested.
The BBC has requested a response from the government.
NFTs are digital assets that have unique characteristics, as each one is distinct from any other, but that do not exist in physical form.
Digital fan tokens can be visualized as proof of possession for virtual or physical assets. Ownership of the tokens can provide fans with various benefits, such as being allowed to vote in supporter surveys or having the opportunity to get tickets.
Some of them can be traded, such as through Non-Fungible Tokens (NFTs), but that also means their worth can fluctuate drastically, with the capacity to make or lose a substantial sum of money.
NFTs underwent considerable acclaim - as well as prices that skyrocketed - during and after the pandemic, with individuals and organizations urged to build them, however, politicians claim their unpredictable market prices are worrisome.
Dame Caroline Dinenage, chair of the CMS committee, said that clubs have been utilising crypto-asset schemes to take advantage of their loyal followers, often giving them false hopes of rewards and special advantages which never take place.
The Conservative MP continued by stressing that fan token schemes must not be utilized as a replacement for fostering meaningful connections with supporters.
The report by the committee concluded that "because of the special association between clubs and supporters, it is possible that fans' speculation on digital currency related to sports events could lead to financial losses for them and a damaging of the reputation of the clubs."
The organization expressed its worries about the increasing prevalence of crypto assets in the arts, with Dame Caroline noting that "artists may be in danger of having their efforts taken advantage of and publicized without authorization".
A British collector purchased a fraudulent Banksy NFT from the artist's website for a sum of £244k in the month of August 2021.
NFTs have risen in popularity as a means of fabricating and selling digital art on blockchains - the digital records that sustain crypto transactions - though they do not provide the purchaser with the real artwork or its copyright.
Fan tokens are collectible digital memberships that can be utilized to unlock benefits such as voting in polls or acquiring exclusive tickets.
Fan tokens that can be bought and sold on a market have seen a sharp decline in value since reaching their highest point a few years ago.
A recent announcement of a Socios partnership with Tottenham Hotspur was harshly criticized by supporters, who argued that fan involvement with the club should not demand payment and highlighted the danger of losing money through investing in digital currency.
Kieran Maguire, a specialist in football finance, informed the BBC that major football clubs probably regard crypto-assets as an "immediate cash benefit" and an opportunity for more income sources following the pandemic.
However, he noted that the excitement surrounding commodities such as fan tokens and NFTs has since faded, along with their worth.
Mr Maguire stated that a burst of enthusiasm had been created which gave rise to conjectural values for [them]. Once people got to the bottom of how small the advantages were, they began to search for an escape plan.
He said that after the "stampede", negative prices were seen and there were few trades taking place.
Fan tokens can generally be interchanged with each other as fungible, equivalent assets, while NFTs that contain distinct digital labels and intended to be singular collectibles cannot.
Recent years have seen Formula 1 teams look towards NFTs as a means of involving fans or granting membership benefits.
In April 2022, the Mercedes F1 team declared the launch of multiple NFTs in partnership with FTX - a few months prior to the collapse of the exchange and the apprehension of its proprietor, Sam Bankman-Fried.
Recently, the Williams F1 team partnered with the crypto exchange Kraken, allowing NFT owners to elect tokens to be exhibited on the vehicles of the forthcoming US Grand Prix.
Oracle Red Bull Racing have forged a partnership with Bybit, an exchange and sponsor, enabling the team to offer a range of NFTs.
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