The Brazilian soccer club Vasco da Gama signed a deal with MBDA (Mercado Bitcoin Digital Assets) for a tokenization project. Each token will correspond to a portion of the transfer fees relating to12 players educated and trained in Vasco’s academy. The project aims to offer fans the opportunity to contribute financially to the club and enable token owners to obtain financial returns relating to the transfers of the 12 players.
The Solidarity mechanism is a system established by FIFA that enables the club that contributed to an athlete’s initial education and training to receive a portion of future revenues. Specifically, it gets a cut of the compensation received by the player’s current club where there’s a transfer before the expiry of the athlete’s contract. In this case, Vasco was the first training club for the 12 players, and a percentage of the money paid for the athletes by the buying club will go to Vasco. Each token is worth 1/500,000 of each of the 12 selected players’ solidarity value and has a nominal value of R$100 (currently around $18). Token owners will receive financial returns when and if player transactions occur.
For example, if Pedro is trained in Vasco’s academy and now plays for PSG and transfers to Real Madrid before the expiry of this PSG contract, part of the money Real Madrid will pay PSG for Pedro will go to Vasco. The tokens are worth 1/500,000 of that value.
Vasco does not influence the transaction decisions as none of the players remain at Vasco.
The football club had been working with KPMG since 2018 on the possibility of using cryptocurrency. Conversations with MBDA began earlier this year regarding structuring, digitalizing, registering, and tokenizing blockchain assets. The partners expect that the tokens will be available for transaction in the Marcado Bitcoin’s platform by the end of 2020.
Various legal matters had to be resolved first. Most notably, Vasco consulted with the Brazilian securities commission to confirm that tokens would not be treated as securities.
MBDA pre-purchased 20% of the tokens for a value of R$10 million ($1.8 million) and will receive an additional 5% for the services provided to Vasco. Vasco will own the remaining 75%, which it will be able to put up for sale in the Mercado Bitcoin Exchange once negotiations are finalized.
According to Transfermarket’s market value of the players and accounting for potential devaluations and appreciations of the players, Vasco projects a potential total of R$50 million ($9 million) to be earned over the next couple of years by all token owners combined.
Spencer Dinwiddie carried out a similar project by tokenizing his NBA contract. When his token launched, it only raised 10% ($1.3 million) of the value he had planned.
The cryptocurrency market for sports is expanding significantly in Brazil and elsewhere. Most of the blockchain solutions adopted by clubs aim to increase fan engagement with the organization and offer products or services that serve as another form of interaction. Recently, Socios.com said it would launch Fan Tokens with Mixed Martial Arts league, Dapper Labs launched NBA’s Top Shot blockchain app, and PSG signed with Sorare for blockchain collectibles. On the other hand, Vasco’s project is more focused on using tokens as a means to raise funds and enable regular fans and the public to invest in the club. It is the first project of its kind in the Brazilian sports industry.