A team in Gibraltar will pay players in cryptocurrency as football delves into the innovation in the financial sector

Nestled between the Rock and an airport runway, a football team are making history in Gibraltar. This time it is not the national side conceding an exorbitant number of goals (124 at the last count in four and a half years) or Lincoln Red Imps beating Celtic in the Champions League. It did not even happen on the artificial pitch of the iconic national ground, Victoria Stadium. Instead, Premier Division Gibraltar United have crept into the spotlight by becoming the world’s first football team to introduce cryptocurrency.

Through their owner, Pablo Dana, an investor in the cryptocurrency Quantocoin, the club started a sponsorship partnership. Dana says all player contracts will include payment agreements in cryptocurrency by next season.

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Some may see this as a random entry point for cryptocurrency in football, at a semi-professional team in a league that became Uefa certified only in 2013. Look more closely, though, and it makes perfect sense. Gibraltar’s finance sector is leading the charge in fintech (technological innovation in the financial sector) and the blockchain (the public database that keeps a permanent record of digital transactions in cryptocurrency).

In January 2018 Gibraltar introduced regulations for businesses using the blockchain and the government is set to launch the world’s first legal framework for initial coin offerings (ICOs), which crowdfund the launch of cryptocurrencies such as bitcoin on to the blockchain.

This strategy shows the Rock is a step ahead, as financial services the world over have floundered when addressing cryptocurrency’s stratospheric yet unregulated rise. Last year worldwide investment in ICOs reached $3.7bn, up from $102m in 2016, and the best-known cryptocurrency, Bitcoin, increased in value by more than 900%.

With great rises also come great falls though – cryptocurrencies have seen stark drops in value in early 2018 because of governing bodies’ reluctance to legitimise the industry, as well as Facebook and Twitter banning forms of cryptocurrency advertising. In June the South Korean cryptocurrency exchange Coinrail was hacked, leading to a sharp price drop. The difficulties which arise from this instability, such as a lack of trust from retailers and businesses, mean cryptocurrencies remain exciting investments that cannot entirely become tangible, disposable income in many cases.

By regulating the industry, Gibraltar is trying to bring transparency and legitimacy to crypto-trading. The Italy-born Dana says a similar preoccupation with transparency prompted the introduction of cryptocurrency to Gibraltar United, saying the blockchain’s open-access nature could minimise corruption scandals that have plagued football. It has given his small club a solution to paying foreign players who cannot easily set up bank accounts in Gibraltar.

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Dana says Gibraltar offers the perfect environment: “It was the first [place that] regulated betting companies 20 years back, when everyone was seeing them as horrible. They put compliance and anti-money laundering regulations and created a platform – they have the intelligence to do the same with cryptocurrencies.”

The comparison is an interesting one. Love it or loathe it, gambling has become a feature of football coverage, earning clubs millions of pounds in advertising revenue – in the most recent season nine Premier League teams had betting companies as their main shirt sponsors.

In January Arsenal showed the blockchain’s potential, becoming the first major football club to sign a sponsorship deal with a cryptocurrency, CashBet.

Beyond advantages such as compliance and ending under-the-table cash payments, blockchain transfers are practically free from fees or tax and are immediate. The London Football Exchange (LFE) says these lower costs provide an opportunity to engage fans in new ways. Their head of partnerships, Danny Stroud, says the LFE wants to create a token-based football community, to “enable clubs to have a direct connection with fans in a frictionless marketplace”.

The LFE has agreements with the Italian club Bari and Madrid-based Alcobendas to introduce the exchange’s cryptocurrency to their club structures. These agreements plan to lower ticket and merchandise pricing and offer fans the opportunity to buy equity in clubs, all using cryptocurrency, thus weaving crypto-trading into fan experiences.

The amateur Turkish side Harunustaspor became the first club to sign a player using cryptocurrency

Cryptocurrency’s ascent is not unlike the “get rich quick” culture seen in football. It is making overnight millionaires of ordinary, lucky investors. Footballers past and present are taking the plunge: Lionel Messi, Michael Owen, Roberto Carlos and Luís Figo boast partnerships with blockchain-related companies.

The rest of the football world is clearly taking notice, with smaller clubs leading the way. In January the amateur Turkish side Harunustaspor, who compete in the Sakrya First Division Group B, became the first club to sign a player using cryptocurrency, paying around £385 worth of bitcoin, plus 4,500 lira (£470), for Omer Faruk Kiroglu. Though still small-scale, the move confirms the potential of the blockchain.

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Football’s exponential rise in value over the past two decades could arguably be compared to cryptocurrency’s shorter but sharper one. However, the sport has the luxury of stability in its huge success, based on unwavering demand from billions of fans worldwide. The blockchain’s volatility may mean bigger clubs decline to gamble or fear partnerships could tarnish their reputation. In March Milan’s then owner failed in attempts to use bitcoin to pay off a €10m portion of the loan he took to buy the club, showing the limitations of cryptocurrency when it comes to big business in football.

On the other hand blockchain cryptotrading could make the transition that betting companies did and become an integral feature of football. Gibraltar United have shown that, in the right environment and with the right leadership, football might begin to hedge its bets.