World Soccer Gossip: Brazilian football team tokenizes transfer fees

Advanced financial innovations and sports are usually not two areas that one would think would mix quite easily, but dig beneath the surface and you will be surprised to see the link between mathematics and sports, which often ends up showing itself through the financial systems in play.

One of the best examples of this is with the ‘Moneyball’ approach, which was introduced to baseball by Billy Beane with the Oakland Athletics, and was then used by the Boston Red Sox to win the World Series in 2004. This approach of using data and analytics to find undervalued players to build a team has now begun to be used across various sports, from cricket to football, and underlines how much of a role numbers can play in modern sports. Thus, innovation in finance is now making its way quickly into sports as well, and this latest announcement by a football club in Brazil could just be the first sign of a new wave of innovation.

Vasco da Gama, which is one of the biggest clubs in Brazil, announced a partnership with Mercado Bitcoin, which is one of the largest cryptocurrency exchanges in Latin America, to tokenize rights from FIFA’s solidarity mechanism. The FIFA Solidarity Mechanism is part of FIFA’s global transfer regulations, which governs player transfers all over the world. The solidarity mechanism aims to incentivize clubs to develop their own young players, as it mandates that up to 5% of a player’s transfer fee can be shared with all the clubs where the player was part of the squad up to the age of 23 years old. Thus, under this partnership between Vasco and Mercado, those rights will be tokenized, and token holders will be eligible to receive a percentage of the transfer value of the player’s whose solidarity payment rights have been tokenized.

This move towards digital currencies and adoption of tokenization is no surprise, as these mechanisms have been becoming popular globally as well. Cryptocurrencies are only just beginning to find their way into sports, with some football clubs tying up with cryptocurrency betting partners, for example, but this innovation has already become quite common in some areas, for example online gambling. Online casinos and gambling grew in popularity this year as lockdowns prevented people from visiting land-based casinos, but they also used cryptocurrencies to draw in more players, by offering the option to make payments and withdrawals using crypto. Such bitcoin and ethereum games have seen a lot of transactions, and this trend is set to continue in the coming weeks as well, underlying the fact that digital currencies are here to stay.

Vasco and Mercado will be creating 500,000 tokens, which they hope to sell for around $9 million. Each of these tokens will represent a fraction of the solidarity payment rights for 12 players who have been part of Vasco’s youth teams, including some big names such as Philippe Coutinho, Douglas Luiz, Alex Teixeira and Allan, who are playing at top European clubs and could thus command hefty transfer fees whenever they make their next move. This arrangement has been in the works for some time, as Vasco executives confirmed that they have been looking for opportunities to use cryptocurrencies to generate extra revenue since 2018.

Mercado has also said that they are open to working with other football clubs to create similar arrangements as well, as it opens up a new revenue source for these businesses. Time will tell as to whether this venture proves to be a success, but it is definitely another indication of how cryptocurrencies are beginning to enter mainstream finance and other avenues.

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