When is a crypto token not an investment? When it’s a fan token. At least that’s the view taken by Brazil’s regulatory agency, the CVM (Comissão de Valores Mobiliários). In a recent address, the SEC-like organization distinguished cryptocurrencies and fan tokens, detailing the latter’s utility beyond mere speculation. The comments, made by the CVM’s Market Development Superintendent, Antonio Carlos Berwanger, bring greater clarity to a region renowned for its love of football.
Regulators Get to Grips With Fan Tokens
There’s great debate as to what constitutes a utility token, particularly in regulation-heavy territories like the US, where the SEC’s currency chair, Gary Gensler, believes most digital assets constitute securities. His is an extreme stance, however, that has little support domestically, let alone abroad, where other countries enforce their own crypto regulations. In Brazil, that duty falls to the CVM, whose recent explainer on fan tokens appears to have resonated with Portuguese-speaking football fans.
46% of Brazil’s 214 million citizens profess to love football, creating a ripe market for the expansion of SportsFi, a growing sector that combines fan power with components of web3, driven by tokens that can unlock experiences and rewards. While not limited to football, the so-called beautiful game has embraced fan tokens, with Tottenham Hotspur the latest club to launch a fan token on sports chain Chiliz. In the last five years, Chiliz’ blockchain platform has handled over $400M in revenue for sports teams and leagues.
Redefining Sports in a Digital Age
As the world has gone digital, sports have followed suit. While matches still take place on grass and astroturf pitches the world over, they’re vastly outnumbered by those taking place online between esports players. Many major football teams now have professional esports players who represent their club at games such as “FIFA” and compete in lucrative tournaments. As the way in which football is consumed has transitioned from drafty stadiums to streaming platforms, its clubs have moved with the times and adopted a digital-first strategy.
So where do fan tokens fit into all of this? In one sense, they’re merely a natural extension of sports digitalization. Most of our money is now digital, be it savings in a neobank or bitcoin in a blockchain wallet. Fan tokens are an inevitable extension of this. The question, at least from a regulatory perspective, is whether their primary purpose is as a speculative vehicle or as a medium of exchange that can be redeemed for various perks and rewards.
While fan tokens, like all crypto assets, can go up and down in value, the clubs issuing them have focused on promoting their utility. The price of fan tokens issued by clubs such as FC Barcelona (BAR), Arsenal (AFC), Manchester City (CITY), and Paris Saint Germain (PSG) appears to be uncorrelated to performance on the pitch, making them unsuited to speculation. Instead, the tokens seem to resonate with Gen X and Millenial fans of the clubs in question. Their season tickets and live streams are digital, and they’re happy to match this with digital tokens – particularly if it’ll get them into an exclusive lounge or meet ‘n greet.
Fan tokens are less about profit, in other words, and more about loyalty. Just as diehard fans will support their club through thick and thin, they’ll hold fan tokens in their wallet provided they continue to provide some kind of utility. This is borne out by Deloitte’s Sports Fan Insights report, which reveals that around 40% of supporters are familiar with fan tokens and almost 75% interested in them if they provide an opportunity to win rewards. It may take longer for “SportsFi” to enter the dictionary, but the era of fan tokens has very much arrived.
Source: https://www.analyticsinsight.net/sportfi-soars-as-brazil-regulator-gives-fan-tokens-the-thumbs-up/