Broken – Earlybirds Invest

Opinion by: Przemysław Kral, CEO of zondacrypto

The football transfer market has long been seen as a world of discrete backroom deals and negotiations. The transfer window brings immense excitement to supporters wanting to see how clubs prepare for the season ahead.

It’s not always smooth sailing, given the huge capital requirements and tight deadlines the clubs face to complete the deals. There is an option that could overcome these issues.The answer has come to the fore in recent years, and the football industry is beginning to embrace it.

Football has become a great partner to the crypto industry, with a rapid increase in sponsorship deals with football clubs making up 43% of all crypto sports sponsorships in the last year, roughly valued at $213 million, according to SportQuake.

There is an opportunity for clubs to take these partnerships even further by integrating blockchain technology into their financial systems to increase transparency and democratize access to the transfer market.

Football clubs have already proven that blockchain works

This isn’t an entirely foreign concept in football transfers. In 2018, cryptocurrency was first used for a transfer when Ömer Faruk Kiroğlu was bought by Harunustaspor for a fee partially paid in Bitcoin. Several transfers have since been completed by major clubs worldwide, including Inter de Madrid, São Paulo FC and Raków Częstochowa.

These transfers were all completed with reduced settlement times and bypassed numerous cross-border payments that could have stunted the transactions. The process is becoming simpler with the development of more efficient and regulated crypto-native payment rails.

The advantages don’t only apply to clubs — governing bodies, including UEFA, could also leverage regulated crypto payment rails to automate the release of performance-based rewards should clubs qualify for the Champions League.

Overcoming turbulent markets

Player transfers require vast amounts of capital; not only are the initial fees and add-ons in the multi-millions, but the settlement and transaction fees for cross-border payments often mean that lower league clubs struggle with access to the global market.

An early example was when São Paulo FC wanted to buy Giuliano Galoppo from Argentine side Banfield Athletic Club. Still, the sale was in trouble due to the turbulent Argentine FX market. This necessitated stablecoins, which São Paulo FC used to complete the transfer for a fee valued between $6 and $8 million in USDC.

While the transfer was later subject to Argentine export regulation, leading to the advantage gained by using crypto being negated, the example highlights the potential for blockchain technology to provide a fixed and reliable value amid turbulent financial markets.

As the economic world of football continues to expand globally, systematic modernization through a regulated, blockchain-powered framework could be the key to ensuring all clubs, regardless of size, market and location, have an equal opportunity to participate in the transfer market.

Winning deadline day

“Deadline Day” is the term used for the final day of the football transfer window, where clubs frantically attempt to finalize deals, often at the mercy of technology and bureaucracy. In 2015, a faulty fax machine thwarted former Manchester United goalkeeper David De Gea’s move to Real Madrid.

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Cross-border payments between teams in different countries can take days (or sometimes weeks) to settle, creating a bottleneck that can hinder a transfer or risk clubs missing crucial deadlines. Bringing regulated crypto rails into play can allow transactions to be completed in minutes, highlighting the potential to de-escalate the hectic nature of deadline day.

The implications of introducing blockchain technology to the football transfer market go beyond beating the deadline day clock. Smaller clubs in emerging markets could benefit by democratizing access to faster, cheaper and more efficient rails. The worries of elongated settled times that risk jeopardizing crucial deals are minimized significantly, empowering teams to participate effectively in the global market and attract key talent.

The financial fair play ledger

Beyond democratizing access, crypto and blockchain could have a positive role in profit and sustainability rules or financial fair play. These rules aim to level the playing field in the transfer market but the penalties clubs face, such as point deductions, can be devastating to their seasons and supporters.

Blockchain technology could help boost transparency and make football transfers more equitable and seamless. By creating a so-called “Financial Fair Play Ledger” with all transfers and relevant financials onchain, transparency would be increased exponentially, and clubs would avoid falling prey to these rules and unnecessary penalties.

Crypto provides multiple solutions

Those cases are incidental, though; there’s a much wider field of opportunity here. Crypto payment rails can solve the most significant issues affecting the football transfer market by creating an overarching, regulated transfer market onchain. This could ensure clubs adhere to profit and sustainability rules more efficiently, enable smaller clubs to access the broader transfer market by slashing cross-border exchange fees, and overcome deadline day chaos by reducing transfer settlement times.

With more clubs embracing crypto sponsorship, there’s a significant opportunity for governing bodies to officially endorse blockchain technology and join them onchain. There is real potential for blockchain technology and cryptocurrencies to be leveraged as tools for more efficient (and cheaper) cross-border football transfers, leading to a positive, industry-wide impact on club finances, income sources and spending activities. For now, crypto is making its mark in the world of football and sport, through sponsorship, but also, increasingly, one lightning-fast transaction at a time.

Opinion by: Przemysław Kral, CEO of zondacrypto.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.